Regulation
MEV reporting and compliance requirements
The European Union (EU) has labeled Maximum Extractable Value (MEV) as an illegal market abuse under its Markets in Crypto-Assets (MiCA) Regulations.
This important measure aims to curb sophisticated market manipulation and allow all participants to engage fairly.
EU regulatory measures and definitions
MEV refers to the profits that block producers can earn by rearranging, including or excluding transactions within a block. This manipulation can make the system unfair, giving an advantage to those with more resources and technical knowledge. Patrick Hansen, Circle’s head of European strategy and policy, highlighted the seriousness of the problem.
“The notorious MEV, in which a miner/validator rearranges transactions to initiate specific transactions and make profits, clearly suggests market abuse,” he said. explain.
The European Securities and Markets Authority (ESMA) describe measures to combat MEV. According to ESMA, trading platforms are required to monitor and report suspicious MEVs. activitiesand the proposed standards include detailed procedures for detecting exploits.
The ESMA draft model is not final and could undergo modifications in the coming months. The regulator has set June 25 as the deadline for stakeholders to submit comments on the draft standards.
Learn more: What is Maximum Extractable Value (MEV)?
MEV has been controversial within the blockchain community since 2018, inflating transaction costs and undermining the network. security, and promote unfair trade. By rearranging transactions, miners capture value, leading to higher fees and inefficiencies.
Prominent figures in the crypto industry suggest different ways to solve this problem. Vitalik Buterin, co-founder of Ethereum, recently address MEV problems. It assumed to reduce MEV through protocols that hide transaction details until confirmed and by separating transaction proposers from block builders to limit unfair value extraction.
US financial regulators are also aware of the MEV threat. The US Department of Justice (DOJ) announcement the arrest of two brothers for using MEV tactics to steal $25 million from Ethereum. They face charges of fraud and money laundering, carrying potential sentences of 20 years in prison.
ESMA’s draft standards provide a collaborative enforcement approach, encouraging cooperation between authorities within and outside the EU. Once finalized, these standards will shape the EU crypto regulatory environment and set a precedent for other jurisdictions.
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