EU securities regulator calls the use of MEV bots abusive

Companies operating in the bloc will be required to report such transactions as suspicious

28.05.2024 - 10:20

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What’s new? MEV bots are classified as a tool for market abuse under the “Markets in Crypto-Assets” (MiCA) regulation, which will soon come into force in the European Union. MEV bots are currently being investigated by the European Securities and Markets Authority (ESMA), Circle’s director of EU strategy and policy Patrick Hansen said.

Source: x.com

What else is known? According to Hansen, ESMA’s new draft explicitly states that the use of MEV bots is an abuse. It is clarified that when they are used, a miner or validator can arbitrarily change the order of transactions when they are included in blocks to make more profit.

ESMA’s statement implies that regulated crypto companies in the EU will have to identify instances of MEV use and report them as part of voluminous suspicious transaction or order reports (STORs). For example, the template for a suspicious transaction report to ESMA alone is six pages long.

Hansen questioned the appropriateness of such extensive reporting requirements given the complexity of MEVs and the frequency of their occurrence in the crypto market.

In addition, ESMA’s draft standards suggest cooperation with authorities outside the EU to combat market abuse. As a result, MEV-related companies may face investigations and enforcement actions not only in the EU but also in other countries.

MetaMask developers have implemented the Smart Transactions feature to protect against MEV bots and reduce costs

It is available to crypto wallet users worldwide as an additional feature

ESMA will accept feedback on its draft standards from stakeholders, including crypto firms, until June 25. Once finalized, the standards are expected to play a crucial role in shaping the regulatory framework for cryptocurrencies in the EU, potentially setting a precedent for other jurisdictions.

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