#EU Watchdog Says Reordering #Blockchain Transactions Might Be Market Abuse. Industry Says It's Not

The European Securities and Markets Authority (ESMA) has raised concerns about a practice utilized by certain crypto miners, labeling it as a potential form of market abuse in its latest regulatory proposals under the Markets in Crypto Assets (MiCA) framework.

Known as maximum extractable value (MEV), this practice involves blockchain operators reordering user transactions to maximize their own profits. While ESMA considers MEV as potentially suspicious, some industry experts argue that it's not entirely negative and plays a role in improving blockchain network efficiency.

MEV encompasses various trading strategies where blockchain operators manipulate the network's transaction queue to extract additional profits, often by reordering transactions or frontrunning them with new transactions just before they are written to the blockchain ledger.

Anja Blaj from the European Crypto Initiative (EUCI) emphasizes that MEV should not automatically be considered market abuse, as its primary purpose is to compensate validators for their work. However, some policy watchers argue that MEV is beyond the scope of MiCA regulation, warning against potential overregulation.

ESMA's consultation on tackling market abuse under MiCA acknowledges the potential implications of MEV on market integrity. While MEV may raise questions about the order validation process on the blockchain and could lead to frontrunning, it doesn't necessarily constitute market abuse in every instance.

ESMA and the EBA are seeking feedback on regulatory measures under MiCA, with stakeholders pushing for clearer guidelines on MEV-related scenarios to determine market abuse & responsibility. Peter Kerstens, an adviser to the European Commission, notes ongoing discussions on MEV, with ESMA seeking public feedback until June 25. This consultation aims to clarify if & when MEV could lead to market abuse, suggesting an official stance may follow.

Source - coindesk.com

#CryptoNews🔒📰🚫 #BinanceSquareTalks