MiCA law enforcement causes concern as MEV-involved organizations on Ethereum and other smart contract platforms may face a business ban in the EU.
The adoption of MiCA by the European Parliament on April 20, 2023, is an important turning point because it is the first legislation that governs the issuance and delivery of services related to cryptocurrencies and stablecoins.
It will go into effect between the middle of 2024 and the beginning of 2025. MiCA’s Article 92, which tries to deter and outlaw market misuse using crypto-assets, is particularly intriguing despite being progressive.
According to attorneys and industry stakeholders, this clause has received attention specifically because it could have repercussions for MEV participants operating in the EU.
The “prevention and prohibition of market abuse involving crypto-assets” is emphasized in Title VI of the MiCA, which applies to all transactions, orders, or acts involving any crypto asset traded on exchanges.
Notably, this legislation applies to all actions on a trading platform like Kraken or within the on-chain ecosystem using services like Uniswap or PancakeSwap.
According to this view, MEV, a practice that involves changing transaction order to obtain the most value possible from block generation, is currently under investigation because of MiCA.
In particular, if they involve artificial price inflation or dishonest transactions, the legislation permits agencies to investigate certain MEV practices that can be viewed as market manipulation.Along with market manipulation, wash trading is another illicit market abuse that artificially inflates trading activity.
According to observers, this could make it difficult for Crypto-Asset Service Providers (CASPs) and platforms, such as exchanges authorized to operate in the area, to guarantee market liquidity for popular coins while adhering to the strict MiCA rules.
Experts foresee more scrutiny for MEV teams throughout the EU based on this broad interpretation, even though enforcement is months away. If MiCA outlaws MEV practices in Europe, the decentralized finance (defi) and cryptocurrency ecosystems may be affected, influencing liquidity.
However, the EU’s dedication to controlling the quickly changing digital asset ecosystem is highlighted by MiCA’s aggressive effort to police market manipulation in the crypto space.
As a result, other countries will learn from MiCA’s adoption and modify their regulatory frameworks as the rest of the world observes its effects.
Flashbots, an Ethereum-focused firm with a recent Series B fundraising round led by Paradigm, raised $60 million. Their Single Unifying Auction for Value Expression (SUAVE) network, which seeks to lessen the detrimental effects of MEV, will continue to be developed using the funds.
