European regulators say MEV mining techniques may be ‘market abuse’ [Video]

Previewing the content of transactions before they’re confirmed in a block could result in market abuse, according to European regulators. The latest proposals for the EU’s Markets in Crypto-Assets (MiCA) Regulation set reporting obligations for digital asset service providers on the detection/prevention of market abuse, investor protection, and operational resilience.

Previewing and/or re-ordering transactions for inclusion in an unconfirmed block is known in the blockchain world as “maximal extractable value” (MEV). MEV techniques are most commonly known in the DeFi, decentralized exchange (DEX), and Ethereum worlds, where there’s more opportunity to examine the contents of a smart contract before it’s included in a block.

The comment on potential market abuse via MEV was published in the third consultation package report from the European Securities and Markets Authority (ESMA) on March 25.

“ESMA notes that MiCA is clear when indicating that orders, transactions, and other aspects of the distributed ledger technology may suggest the existence of market abuse e.g., the well-known Maximum Extractable Value (MEV) whereby …