Paradigm has raised concerns over ESMA’s proposed regulations under MiCA, particularly regarding the misinterpretation of MEV and potential regulatory overreach. MEV, a key feature in DeFi ecosystems, allows miners and validators to extract value from transaction reordering within a block. Paradigm argues that MEV is essential for the efficiency and security of decentralized networks, contrary to ESMA’s characterization of it as market abuse. The firm believes that applying MAR to the base layer of crypto assets could be impractical and inconsistent with ESMA’s mandate, potentially stifling innovation and forcing technology firms to relocate outside the EU.
Paradigm stresses the need for further research and engagement with the private sector to better understand the role of MEV in blockchain ecosystems. The firm suggests that MAR should be limited to situations involving centralized services operated by CASPs, rather than decentralized infrastructure operators. Paradigm emphasizes the importance of fair market practices and transparency in centralized exchanges operated by CASPs. As ESMA continues its consultation process, the crypto industry remains vigilant about potential regulatory developments that could impact the future of blockchain and digital assets in Europe.
