The European Securities and Markets Authority (ESMA) is scrutinizing Maximum Extractable Value (MEV) as a prime example of illegal market abuse under its proposed technical standards for the Markets in Crypto-Assets (MiCA) regulation. This examination has significant implications for the crypto industry, as highlighted by Patrick Hansen, a prominent commentator on crypto regulations.

According to the ESMA draft, MEV is considered market abuse, as it enables miners/validators to front-run specific transactions and profit from them. As a result, regulated crypto businesses in the EU, including exchanges and brokers, would be required to detect and report MEV instances through comprehensive "suspicious transaction or order reports" (STORs). The proposed standards mandate detailed reporting procedures for MEV detection, which raises concerns about the feasibility of reporting every instance due to the complexity and frequency of MEV occurrences in the crypto market.

ESMA's draft standards also advocate for a collaborative approach to enforcement, urging authorities within and outside the EU to cooperate on sanctioning market abuse. This means that actors involved in MEV could face investigations and enforcement actions from both EU regulators and international authorities. The consultation package includes a range of technical standards aimed at enhancing market integrity and protecting investors, with a focus on MEV underscoring the EU's commitment to addressing sophisticated forms of market manipulation in the crypto sector.

Stakeholder participation in the consultation process is crucial, and ESMA has set a June 25 deadline for feedback submission. The finalized standards will play a critical role in shaping the regulatory environment for crypto in the EU and potentially set a precedent for other jurisdictions. The examination of MEV as market abuse highlights the EU's dedication to ensuring a fair and transparent crypto market.