The venture capitalist firm said ESMA’s approach to crypto market abuse could be a disaster for the industry without suggesting any better ideas.
ESMA’s paper concerns the implementation of measures introduced in the Markets in Crypto Asset Act, the first of whichon 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 .
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.”