EU follows US as it mulls MEV ban – Will Bitcoin miners be affected?

• EU plans to restrict MEV in crypto to minimize ‘market abuse.’ 
• Industry analysts present mixed opinions on the proposal. 

The European Securities and Markets Authority (ESMA) plans to restrict the MEV (Maximum Extractable Value) leveraged by miners and validators.  

Regarding the plan, Circle’s head of Strategy and Policy, EU region, Patrick Hansen, stated the EU aimed to make MEV ‘illegal.’

‘MEV is treated as clear example of illegal market abuse by EU draft standards specifying MiCA rules.’

The MEV restriction is part of ESMA’s implementation guidelines on various rules captured in MiCA (Markets in Crypto Assets Regulation). 

Impact and reactions to EU’s MEV regulation plan

For the unfamiliar, MEV is a way miners and validators increase their earnings by re-ordering transactions to preferentially accommodate those that pay higher.

In the ESMA’s plan (page 10), the ‘re-ordering’ aspect of MEV is viewed as ‘market abuse.’

“Secondly, 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 a miner/validator can take advantage of its ability to arbitrarily reorder transactions to front-run a specific transaction(s) and therefore make a profit.”

Stakeholders should provide feedback on the draft standards before the end of June. If adopted, brokers and crypto exchanges will need to report suspicious transactions or re-orders to the authorities. 

However, Hansen underscored the challenge of implementing the plan should it be adopted. He noted that the plan meant that each MEV instance must be reported. Additionally, MEV operators could face indictments and charges.  

“Actors involved in MEV could become the target of investigations and enforcements.’

EU’s move seems to have followed US steps. Recently, the US DoJ indicted and charged two brothers for $25 million exploitation using a sophisticated MEV technique on the Ethereum network. 

It was the first time a MEV-linked scenario led to charges. But with the EU’s plan, it seems that more operators could face charges.

On his part, Robert Sasu of MultiversX claimed that ‘MEV’ was theft and supported the EU’s plan. 

“MEV is theft. #blockchain world was supposed to create a better world, not to go into the frenzy of greed.”

However, the crypto analysis platform Coinalyze criticized the EU’s proposal. 

“The EU regulators are very determined to destroy the crypto industry in EU. There is no central bank in the world that hate so much crypto as ECB does.’

At the moment, the proposal is just a draft standard. However, should it be adopted, it could have wide implications, especially for validators or miners based in the EU and elsewhere.