The Securities and Markets Authority (ESMA) of the European Union, one of the regulatory bodies overseeing the region’s financial sector, has released its third consultation package on crypto regulations under the Markets in Crypto Asset (MiCA) framework. In its proposed guidelines, ESMA suggests treating miner-extractable value (MEV) as a form of market abuse under existing MiCA rules. MEV refers to an arbitrage strategy that involves reordering transactions within a block to maximize profits for validators and third-party builders. ESMA’s consultation paper states that such practices can suggest market abuse and should be addressed accordingly.
Patrick Hansen, senior director of EU strategy and policy at Circle, criticized ESMA’s policy suggestions, highlighting the complex and burdensome process that regulated crypto businesses would have to undergo to comply with the proposed regulations. Hansen urged all parties involved in MEV practices to provide their input on ESMA’s proposed regulatory changes by the June 25 deadline.
MEV remains a concern in decentralized finance, and developers and industry leaders are proposing various solutions to tackle the issue. Ethereum co-founder Vitalik Buterin recently discussed a multi-faceted approach to combat Ethereum’s MEV problem. This approach includes implementing MEV quarantine strategies, minimizing MEV, using inclusion lists, and reducing node hardware requirements to address the growing problem. Buterin emphasized the need for mitigating MEV rather than outright banning it, allowing protocols like Cowswap to operate while protecting users from the hidden costs of MEV.