EU MiCA discusses MEV: Reordering blockchain transactions may constitute market abuse

Recently, the European Securities and Markets Authority (ESMA) expressed concern about the Maximum Extractable Value (MEV) of market prices, a regulation that helps brokers and operators manage user transactions order to maximize profits, which may be useful in structuring markets under new regulatory frameworks.

MiCA proposal treats MEV as potentially suspicious behavior

Under a series of proposals for MiCA regulations, ESMA treats MEV as potentially suspicious behavior. MEV typically involves a strategy whereby the blockchain operator, the entity responsible for adding blocks to the chain, reorders transactions to extract additional profits before they are permanently recorded on the blockchain’s ledger. This manipulation may include front-running, where an operator places its own transactions before users submit their transactions, potentially undermining the fairness and integrity of the blockchain.

Industry Opinion: Invisible taxes help efficiency

MEV is often called an "invisible tax", which may reduce users' profits through methods such as sandwich attacks and preemptive transactions.

CoinDesk reported that although the nature of MEV is controversial, some advocates in the industry argue that MEV plays a positive role in promoting the efficiency of blockchain networks by improving the efficiency of blockchain networks. A policy expert from the European Encryption Initiative (EUCI) also said that the MEV defense shows: “MEV itself should not be regarded as a market abuse, nor should it have a negative connotation.” He emphasized that the main role of MEV is to reward validators for network maintenance. contribution, suggests that only specific strategies that resemble market abuse should be scrutinized.

Should MiCA control MEV?

There is still discussion on whether MEV falls within the scope of MiCA specifications. EUCI expressed concern that regulating MiCA to MEV could lead to excessive regulation. And ESMA’s recent consultation on market abuse includes the extension of existing EU rules to systems powered by distributed ledger technology.

The European Commission’s Financial Digitalization Adviser noted that while MEV itself is not negative in nature, it raises important questions about market integrity. ESMA’s ongoing public consultation, which runs until June 25, aims to gather feedback on the potential for market abuse caused by MEV.

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