Pooled Order Books in the Crosshairs as EU Regulators Look to Tighten MiCA Oversight

Pooled Order Books Face Heightened Scrutiny as Europe Aims to Bolster MiCA Oversight As the European Union's landmark MiCA (Markets in Crypto Assets) regulatory framework enters its second year, cracks are beginning to emerge that have prompted regulators to re-evaluate certain provisions. One area drawing heightened attention is the use of pooled order books by cryptocurrency exchanges - a practice that could soon face tighter restrictions. Pooled order books, where multiple trading venues aggregate their liquidity into a single, centralized order book, have become a common feature across crypto markets. Proponents argue this approach enhances market efficiency and provides traders with deeper, more liquid markets. However, regulators are now questioning whether this structure introduces risks that need to be addressed. "The pooled order book model raises concerns around transparency, price discovery, and the potential for market manipulation," explains crypto legal expert Emma Channing. "Regulators want to ensure that investors have a clear view of the true depth and liquidity of the market, rather than just an artificial facade created by aggregating orders from various venues." This heightened scrutiny aligns with the EU's broader goal of establishing a robust, transparent, and investor-protective crypto ecosystem under MiCA. As the regulation evolves, industry insiders anticipate that requirements around order book disclosure, conflict of interest management, and enhanced surveillance could be introduced to rein in the pooled model. "MiCA was designed to provide clarity and safeguards, but the pooled order book dynamic creates gray areas that regulators will want to tighten up," says blockchain analyst Jacob Katz. "Expect to see more prescriptive rules around how exchanges handle and report their liquidity, as well as stricter controls on any cross-ownership or affiliations between trading venues." The implications of these potential changes could be far-reaching. Cryptocurrency exchanges that rely heavily on pooled liquidity may need to re-evaluate their business models, potentially shifting towards more decentralized, exchange-specific order books. This could impact market depth, trading costs, and the overall trading experience for investors. Moreover, the crackdown on pooled order books could have ripple effects across the broader crypto ecosystem. Providers of market data and trading infrastructure may need to adapt their offerings, while asset managers and institutional investors may face new due diligence requirements when assessing the quality of crypto trading venues. As the EU continues to refine MiCA, the future of pooled order books remains uncertain. However, one thing is clear: regulators are determined to ensure that the emerging cryptocurrency markets operate with the highest levels of transparency and integrity, even if it means disrupting long-established industry practices.