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In a bold move to regulate the cryptocurrency market, the European Union (EU) recently classified Maximum Extractable Value (MEV) as an illegal market abuse under the Market in Crypto Assets (MiCA) Regulation. The decision aims to curb sophisticated market manipulation and ensure fair competition among all participants.
Regulatory Implications of MEV
MEV is the profit that block producers can make by reordering, including, or excluding crypto transactions in a block. This practice can make the system unfair and favor those with more resources and technical knowledge.
Classifying MEV as a market abuse could be a major hurdle for EU-regulated crypto businesses: According to the talks, EU-based companies would be required to detect and report instances of MEV as “suspicious transaction or order reports” (STORs).
Reaction from the cryptocurrency industry
Prominent figures in the crypto industry have proposed different ways to address this issue. Vitalik Buterin recently discussed the issue of MEV and proposed reducing it through protocols that allow transaction details to be hidden until confirmation. He also suggested separating transaction proposers and block producers to limit illicit value extraction.
The US financial regulators are also aware of the MEV threat. The US Department of Justice (DOJ) announced the arrest of two brothers for allegedly using MEV tactics to steal $25 million in Ethereum. They are charged with fraud and money laundering and could face up to 20 years in prison.
With this regulation, the EU is taking strong steps to ensure transparency and fairness in the cryptocurrency market. As debate continues over MEV and its impact on network security and trading fairness, the EU has a key role to play in fighting market manipulation in the ecosystem. Trading platforms will have to adapt quickly to comply with the new requirements, which could change the future of cryptocurrencies in Europe and beyond.
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Evolving and adapting to the world is the best weapon to survive in this world. Cryptocurrency Community Manager. Interested in Blockchain and all its derivatives. Sharing my experience has allowed me to know the area I am passionate about and to be able to compile and digitize information.
Disclaimer
The views, thoughts and opinions expressed in this article are those of the author and should not be taken as investment advice. Please conduct your own research before making any investment decisions.
