Bitget App
Trade smarter
Buy cryptoMarketsTradeFuturesCopyBotsEarn

Paradigm calls European markets regulator to show nuance regarding MEV

CointelegraphCointelegraph2024/06/27 19:25
By:Derek Andersen

Venture capital firm Paradigm has filed a comment letter in response to the European Securities and Markets Authority (ESMA) consultation paper on enforcing abuse prevention in the crypto assets market.

ESMA’s paper concerns the implementation of measures introduced in the Markets in Crypto Asset (MiCA) Act, the first of which comes into force on June 30. Paradigm’s main point of contention, as with earlier commenters, was ESMA’s stance on “market abuse, e.g., the well-known Maximum Extractable Value (MEV).”

ESMA needs a clearer understanding of MEV

ESMA is incorrectly “drawing a parallel between market abuse of the kind seen in traditional, centralized financial markets and activities of base layer actors,” Paradigm said , adding:

“At present, there is no universally-accepted way to identify which MEV-related activities are harmful or suspicious, so requiring the ecosystem to monitor and prevent inherently subjective […] behavior is a recipe for inconsistent application and unintended consequences.”

ESMA needs a better understanding of MEV. Furthermore, regulating base-layer blockchain microstructure is inherently wrong, Paradigm argued. With such regulation, “we likely would not have seen the development of a number of out-of-protocol tools that redistribute the proceeds of MEV back to users—balancing protocol efficiency and security with user welfare maximization.”

Related: Paradigm raises $850M for third crypto fund

Nuance in place of a solution

Paradigm is seemingly referring to rollups and flash bots. A paper touching on their use to counteract the potential misuse of MEV was posted on Paradigm’s website in 2021. Its conclusions were not reassuring, however. “Hopefully, the next year will bring more clarity on MEV and Ethereum’s path forward,” it said.

Fair and equitable use of MEV remains a goal for the future, as the steady stream of “sandwich” attacks shows .

The enforcement of the MiCA article on the requirements for persons professionally arranging or executing transactions should be applied with “nuance.” Existing regulation cannot be applied to a system with fundamentally different organization and architecture, Paradigm said in its letter.

“ESMA should encourage industry to build products that enhance consumer welfare in aggregate without taking an opinionated view on how those products are designed,” Paradigm concluded. It did not suggest a solution to the misuse of MEV.

Magazine: The trouble with automated market makers

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

You may also like

In the past 24 hours, the entire network has liquidated $160 million in short orders, and the total market value of cryptocurrencies has risen to $2.

Odaily2024/07/20 00:14

BlackRock IBIT had a net inflow of $115.4 million yesterday

Odaily2024/07/20 00:14

Fidelity, VanEck and other five Ethereum spot ETFs will start trading on July 23

Odaily2024/07/20 00:14

Yesterday, GBTC had a net inflow of US$20.3 million, and BITB had a net inflow of US$44.6 million.

Odaily2024/07/20 00:14

‌Spot copy trading

More
AIOnline
AIOnline
insight1000/1000
10262.27%
ROI
Total profit $52337.59
HappyPlanets
HappyPlanets
insight500/500
15112.91%
ROI
Total profit $30225.79

Bot copy trading

More
SeiSixSechs
SeiSixSechs
insight115/150
$807.73
Total profit
Total subscriber profits $-67.04
GoldenEgg
GoldenEgg
insight147/150
$1434.19
Total profit
Total subscriber profits $-285.11