MiCA: the EU supervisory authority sees the MEV as market abuse

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There is a new issue in the MiCA field, concerning the MEV – Maximum Extractable Value technique, adopted by blockchain operators. 

On one hand, the European Securities and Markets Authority (ESMA) sees it as market abuse, on the other hand some crypto experts support it. 

MiCA and the new issue on MEV technology between ESMA and the crypto sector

According to what reported, it seems that the European Securities and Markets Authority (ESMA) is raising doubts about the MEV technique – Maximum Extractable Value, adopted by blockchain operators. 

Basically, in the regulatory proposals within the MiCA crypto regulation – Market in Crypto Asset – ESMA has declared the MEV technique as suspicious and market abuse. 

The MEV technique involves blockchain operators, that is, those who add blocks to the chain, being able to reorder user transactions to maximize their profits. The reordering of transactions occurs before they are written in the chain’s ledger. 

The MEV is also defined as “invisible tax” on users, as some methods to extract it, such as sandwich attacks and front running, could directly affect the profits of end users. 

On the other hand, however, the crypto sector does not seem to agree with the ESMA Authority, but rather there are those who believe that it is a positive technique for the system and those who, instead, believe that ESMA should not even worry about it. 

MiCA and the issue on the MEV technique: how EUCI responds

As anticipated, some experts in crypto policies would have stated that the MEV technique would not fall within the scope of MiCA regulation. 

For example, Anja Blaj from the European Crypto Initiative (EUCI) stated the following:

“MEV in itself should absolutely not be considered market abuse and should not have a negative connotation. There are very limited scenarios and tactics that have similar effects to market abuse. This should be emphasized repeatedly, as the purpose of MEV is primarily to compensate good actors for the validation work they perform.”

In general, EUCI not only supports that it is a positive technique, but also that the application of MiCA to MEV could lead to excessive regulation. 

The global reference point

While the decision on what to do about the MEV issue is being made, the entry into force of the MiCA regulation is expected for this 2024. 

According to several experts, the MiCA will have a profound impact on the entire crypto sector, to the point of becoming a global reference point for crypto regulation. 

Meanwhile, some crypto-exchanges have started to prepare to adapt to the regulations. In this regard, Bitget held a Q&A to analyze the impact that MiCA will have and is already having on the European crypto markets.