The Impact of Maximum Extractable Value on Crypto Regulations in the EU

The Impact of Maximum Extractable Value on Crypto Regulations in the EU

The European Securities and Markets Authority (ESMA) has recently brought to light the issue of Maximum Extractable Value (MEV) as a form of illegal market abuse under the proposed technical standards for the Markets in Crypto-Assets (MiCA) regulation. This development has significant implications for the crypto industry as a whole.

Prominent commentator on crypto regulations, Patrick Hansen, highlighted the need for regulated crypto businesses in the EU, including exchanges and brokers, to detect and report instances of MEV through suspicious transaction or order reports (STORs). The sheer complexity of the ESMA STOR template, spanning six pages, raises concerns about the practicality of reporting every single occurrence of MEV.

Collaborative Enforcement Approach

ESMA’s draft standards propose a collaborative enforcement approach, urging authorities both within and outside the EU to cooperate on sanctioning market abuse related to MEV. This means that actors involved in MEV could potentially face investigations and enforcement actions from international authorities, in addition to EU regulators.

Regulatory Environment

The focus on MEV in the proposed standards reflects the EU’s commitment to addressing sophisticated forms of market manipulation in the dynamic crypto sector. Stakeholder participation in the consultation process is deemed crucial by Hansen, as feedback from those directly involved in MEV and other crypto activities is vital for the development of effective regulatory measures.

ESMA has set a deadline of June 25 for stakeholders to provide feedback on the draft standards. Once finalized, these standards are expected to significantly impact the regulatory landscape for crypto in the EU, potentially laying the groundwork for regulatory approaches in other jurisdictions.


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