The European Securities and Markets Authority (ESMA) is examining Maximum Extractable Value (MEV) as a clear example of illegal market abuse under its proposed technical standards for the Markets in Crypto-Assets (MiCA) regulation.

Patrick Hansen, a prominent commentator on crypto regulations, recently brought attention to this on Twitter, highlighting its significant implications for the crypto industry.

MEV Monitoring

In a social media post, Hansen pointed out that the ESMA draft explicitly states:

"...the well-known Maximum Extractable Value (MEV) whereby a miner/validator can take advantage of its ability to arbitrarily reorder transactions to front-run a specific transaction(s) and therefore make a profit" clearly suggests the existence of market abuse."

Hansen noted that nearly all regulated crypto businesses in the EU, including exchanges and brokers, would be required to detect and report instances of MEV through comprehensive "suspicious transaction or order reports" (STORs), with the ESMA STOR template alone spanning six pages.

The proposed standards mandate detailed reporting procedures for MEV detection, raising significant concerns about the feasibility of reporting every single instance due to the complexity and frequency of MEV occurrences in the crypto market.

Additionally, ESMA’s draft standards advocate for a collaborative approach to enforcement, urging authorities both within and outside the EU to cooperate on sanctioning market abuse. This suggests that actors involved in MEV could face investigations and enforcement actions not only from EU regulators but also from international authorities.

Consultation Deadline

The consultation package, part of ESMA’s efforts to refine MiCA’s implementation, includes a wide range of technical standards aimed at enhancing market integrity and protecting investors. The focus on MEV underscores the EU’s commitment to addressing sophisticated forms of market manipulation in the rapidly evolving crypto sector.

Hansen emphasized the importance of stakeholder participation in the consultation process, noting that feedback from those directly involved in MEV and other crypto activities is crucial for developing effective and practical regulatory measures.

ESMA has set a June 25 deadline for stakeholders to submit their feedback on the draft standards. Once finalized, these standards are expected to play a critical role in shaping the regulatory environment for crypto in the EU and potentially set a precedent for other jurisdictions.