Adan submits its response to the MiCA consultation on the detection and prevention of market abuse, investor protection, and operational resilience

In our response, we highlight the key points to consider in order to promote a proportionate and effective system.
Here are some highlights from Adan’s insightful comments.

We support the fight against market abuse. However, we strongly disagree that miners, validators, and custodians should be considered persons professionally arranging or executing transactions (PPAETs).
Miners and validators do not meet the requirements set forth in Article 92 of MiCA.
It is unlikely that imposing PPAET rules on validators/miners would be successful, as they are not market operators. Consequently, it is practically impossible for them to effectively meet these requirements. This approach would not effectively achieve the policy objective of combating market abuse.

Similarly, miners and validators do not have the ability to reorder transactions. Therefore, requiring them to comply with market abuse rules is technically impossible.
With regard to custodians, if a CASP offers only custody services, it should not be subject to market surveillance obligations under MiCA, as its role does not involve the management or execution of trading transactions. These providers do not interact with market dynamics in a way that could influence market integrity or transparency. However, if a CASP is also authorized to carry out trading activities, such as acting as a broker or exchange, it should then be classified as a PPAET.

Adan also provided clarification on the maximum extractable value (MEV) to ensure that it is not automatically classified as market abuse.

In PoW, miners must include transactions in the order in which they are received to ensure that the chronological sequence of transactions is preserved. Reordering transactions within a block would disrupt the continuity of the blockchain and lead to inconsistencies in the transaction history. Consequently, any attempt to reorder transactions or manipulate block contents would result in an invalid block that would be rejected by the network.
In PoS, validators do not have access to transaction contents until they are included in a block and submitted for validation. This blind validation process prevents validators from selectively reordering transactions.
Categorizing MEV as inherently abusive behavior may overlook its essential role in maintaining a healthy and efficient crypto market. MEV is a neutral tool. It is the strategy behind its use that determines whether it is abusive or beneficial.
Adan encourages distinguishing between operations that intentionally or unintentionally harm consumers and those that balance the system (non-toxic MEV vs. toxic MEV). Recognizing this distinction clarifies that MEV itself is not inherently abusive, but its use can be.

Similarly, Adan advocates a proportionate approach when implementing the STOR regime. This would ensure that systems can be tailored to the size, nature, and scale of the trading activities carried out by PEAPTs and, consequently, to the level of risk associated with those activities.
Proportionality ensures that the proposed systems are implemented in a manner that allows for the proper allocation of resources without compromising the ability to prevent and detect instances of market abuse.

Cost is a major concern in the implementation of MiCA. The additional investments required to meet current technical standards for the prevention and detection of market abuse are likely to vary considerably depending on the level of sophistication and size of the company.
Consequently, a careful balance must be struck to protect the integrity of these growing markets without stifling innovation, which would have a negative impact on the EU’s competitiveness.

Adan also provided further details regarding the information related to the "location" of transactions within the STOR model.
Adan emphasized that, in distributed ledger technology (DLT), transactions are propagated and validated by nodes distributed across the entire network. The concept of a transaction’s “location” in a DLT therefore does not necessarily correspond to a physical or geographic location, but it can always be interpreted based on the node’s identity, the path taken by the transaction, and its chronological sequence within the decentralized network.