EU recognizes the use of MEV bots as abuse and introduces strict reporting requirements

The European Securities and Markets Authority (ESMA) Takes Action Against MEV Bots

The European Securities and Markets Authority (ESMA) has announced that the use of MEV bots (Maximizing Extractable Value) is considered market abuse on cryptocurrency markets in accordance with the new Markets in Crypto-Assets Regulation (MiCA) that will soon come into effect in the European Union. Patrick Hansen, Director of Strategy and Policy at Circle in the EU, stated that ESMA’s new regulatory project directly classifies MEV bots as tools for manipulation.

MEV bots allow miners or validators to change the order of transactions in blocks to increase their profits, which can lead to unfair market conditions. According to ESMA’s draft standards, crypto companies in the EU will be required to identify cases of such bots being used and report them within extensive Suspicious Transactions and Order Reports (STORs). The report template consists of six pages and requires a detailed description.

Hansen expressed doubts about the practicality of such extensive reporting requirements, considering the complexity and frequency of MEV bot usage in the crypto market. The ESMA project also includes international cooperation to combat abuses, which may lead to investigations and enforcement measures beyond the EU.

Until June 25, ESMA will be accepting feedback from stakeholders, including crypto firms, on its project. After the discussion and revision period, the new standards could play a key role in shaping the regulatory framework for cryptocurrencies in the EU and set a precedent for other jurisdictions.