European Union authorities are scrutinizing the controversial practice known as "maximal extractable value" (MEV) on blockchain networks, seeking to determine if reordering transactions for profit should be deemed market manipulation.
As part of new crypto regulations under the Markets in Crypto Assets (MiCA) law, the European Securities and Markets Authority (ESMA) has flagged MEV tactics as potentially suspicious activity.
While some argue that MEV improves efficiency, critics view it as an unfair tax on users by frontrunning transactions.
ESMA is consulting on specific guidance around when MEV crosses the line into market abuse prohibited under MiCA's extended rules covering not just trades but also "the functioning of the distributed ledger technology." The regulator is seeking public feedback until late June.
Some policy experts push back, arguing blanket treatment of MEV as abuse is misguided since its core purpose is compensating validators. But others suggest MEV occupies a gray area if it undermines market integrity through unfair reordering tactics.