The European Securities and Markets Authority (ESMA) has recently raised concerns regarding Maximum Extractable Value (MEV) as a form of illegal market abuse in the context of the proposed technical standards for the Markets in Crypto-Assets (MiCA) regulation. Patrick Hansen, a well-known figure in the crypto regulation space, has drawn attention to this issue on social media platforms, highlighting the potential implications for the entire crypto industry.
According to Hansen, the draft standards outlined by ESMA would require regulated crypto businesses in the EU to identify and report instances of MEV through suspicious transaction or order reports (STORs). The level of detail required in these reports, as indicated by the six-page ESMA STOR template, has raised concerns about the practicality of complying with such extensive reporting procedures. The complex nature and frequency of MEV occurrences in the market further exacerbate the challenges associated with detection and reporting.
ESMA’s draft standards also propose a collaborative enforcement approach, calling for cooperation among authorities within and outside the EU to address instances of market abuse related to MEV. This cross-border coordination implies that individuals engaged in MEV activities could potentially face investigations and enforcement actions from international regulators in addition to EU authorities. This shift towards a more cooperative regulatory framework underscores the global nature of the crypto market and the need for coordinated efforts to uphold market integrity.
Hansen emphasized the importance of involving stakeholders in the consultation process to ensure the practicality and effectiveness of regulatory measures targeting MEV and other forms of market manipulation in the crypto sector. Feedback from industry participants directly impacted by MEV activities is crucial for refining the proposed standards and addressing practical challenges associated with their implementation. ESMA has set a deadline for stakeholders to provide input on the draft standards, signaling a commitment to leveraging industry expertise in shaping regulatory frameworks that align with market realities.
The scrutiny on MEV by ESMA and other regulatory bodies reflects a growing awareness of the complexities and risks associated with market abuse in the crypto space. The proposed technical standards aimed at enhancing market integrity and investor protection underscore the EU’s commitment to fostering a transparent and compliant crypto ecosystem. By engaging stakeholders in the regulatory dialogue and promoting cross-border cooperation on enforcement, authorities can work towards creating a more sustainable and resilient regulatory environment for crypto assets.