- The European Union’s proposal to label Maximum Extractable Value (MEV) operations as illegal is causing significant concerns among crypto stakeholders in the region.
- EU plans to restrict MEV in crypto to minimize market abuse.
- Industry analysts present mixed opinions on the proposal.
The EU’s proposal to ban MEV operations could reshape the crypto landscape, sparking debate among industry experts and stakeholders.
EU’s Proposal to Restrict MEV Operations
The European Securities and Markets Authority (ESMA) plans to restrict the MEV (Maximum Extractable Value) leveraged by miners and validators. This move aims to minimize market abuse within the crypto sector. Patrick Hansen, Circle’s head of Strategy and Policy for the EU region, stated that the EU aims to make MEV illegal.
“MEV is treated as a clear example of illegal market abuse by EU draft standards specifying MiCA rules.”
The MEV restriction is part of ESMA’s implementation guidelines on various rules captured in MiCA (Markets in Crypto Assets Regulation).
Impact and Reactions to EU’s MEV Regulation Plan
For the unfamiliar, MEV is a way miners and validators increase their earnings by re-ordering transactions to preferentially accommodate those that pay higher. In the ESMA’s plan, the ‘re-ordering’ aspect of MEV is viewed as market abuse.
“Secondly, ESMA notes that MiCA is clear when indicating that orders, transactions, and other aspects of the distributed ledger technology may suggest the existence of market abuse, e.g., 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.”
Stakeholders should provide feedback on the draft standards before the end of June. If adopted, brokers and crypto exchanges will need to report suspicious transactions or re-orders to the authorities. However, Hansen underscored the challenge of implementing the plan should it be adopted. He noted that the plan meant that each MEV instance must be reported. Additionally, MEV operators could face indictments and charges.
“Actors involved in MEV could become the target of investigations and enforcements.”
EU’s move seems to have followed US steps. Recently, the US Department of Justice indicted and charged two brothers for $25 million exploitation using a sophisticated MEV technique on the Ethereum network. It was the first time a MEV-linked scenario led to charges. But with the EU’s plan, it seems that more operators could face charges.
On his part, Robert Sasu of MultiversX claimed that ‘MEV’ was theft and supported the EU’s plan.
“MEV is theft. The blockchain world was supposed to create a better world, not to go into the frenzy of greed.”
However, the crypto analysis platform Coinalyze criticized the EU’s proposal.
“The EU regulators are very determined to destroy the crypto industry in the EU. There is no central bank in the world that hates crypto as much as the ECB does.”
At the moment, the proposal is just a draft standard. However, should it be adopted, it could have wide implications, especially for validators or miners based in the EU and elsewhere.
Conclusion
The EU’s proposal to label MEV operations as illegal is a significant development that could reshape the crypto landscape. While some industry experts support the move as a necessary step to curb market abuse, others view it as a potential threat to the industry’s growth. As the debate continues, stakeholders will need to navigate these regulatory changes carefully, providing feedback and preparing for possible implications.
