The European Securities and Markets Authority (ESMA) has flagged Maximum Extractable Value (MEV) as a potential form of market abuse, a stance that has worried some industry observers who say the situation is not clear.
In its regulatory proposal published last week under the Digital Assets Act (MiCA), ESMA said MEV could be suspicious. The definition of MEV is broad, but it generally includes trading strategies where blockchain operators (companies and individuals who add blocks to the chain) preview the network's transaction queue to extract additional profits for themselves. Typically, this strategy involves reordering user transactions before they are written to the chain's ledger.
"MEV itself should not be considered market abuse at all, nor should it have negative connotations," Anja Blaj, a policy expert at the European Cryptocurrency Initiative (EUCI), said in a WhatsApp interview. "The scenarios and strategies that have similar effects to market abuse are very limited. This point should be repeatedly emphasized because the purpose of MEV is first and foremost to compensate good actors for the validation work they do." (CoinDesk)