Crypto: Here is the EU's radical solution to secure the ecosystem!

In a bold move to regulate the crypto market, the European Union (EU) has recently classified Maximum Extractable Value (MEV) as illegal market abuse under its Markets in Crypto-Assets (MiCA) regulation. This decision aims to curb sophisticated market manipulation and ensure fair competition among all participants.

Regulatory Implication of MEV

MEV is the profit that block producers can obtain by reordering, including, or excluding crypto transactions within a block. This practice can make the system unfair, giving an advantage to those with more resources and technical knowledge.

The classification of MEV as market abuse could pose significant obstacles for crypto businesses regulated by the EU. According to the consultation, EU-based companies would be required to detect and report instances of MEV as “suspicious transaction or order reports” (STORs).

Reactions from the Crypto Industry

Prominent figures in the crypto industry suggest various ways to address this issue. Vitalik Buterin recently discussed MEV issues, proposing to reduce MEV through protocols that could hide transaction details until their confirmation. He also suggested separating transaction proposers from block builders to limit unjust value extraction.

U.S. financial regulators are also aware of the MEV threat. The U.S. Department of Justice (DOJ) announced the arrest of two brothers for using MEV tactics to steal $25 million on Ethereum. They are charged with fraud and money laundering and could face potential prison sentences of 20 years.

With this regulation, the EU is taking strong measures to ensure transparency and fairness in the crypto market. As the debate over MEV and its impact on network security and trading fairness continues, the EU positions itself as a key player in the fight against market manipulation in the ecosystem. Trading platforms will need to adapt quickly to comply with the new requirements, which could reshape the future of cryptocurrencies in Europe and beyond.