With PEGs, it's not possible to express nested content, so we have to collate for example the blockquoted content of blockquotes and process them separately. Per my understanding (and I might be wrong here), part of the problem is that PEG includes tokenization, so it's not possible to handle blockquote-levels in the tokeniser separately.

More details on PEG for Markdown: - from the author of the PEG grammar, who's also the spec-writer of "Common Markdown": http://talk.standardmarkdown.com/t/standard-markdown-formal-... - from myself: http://www.vfmd.org/introduction/#prior-work

Also, I wrote an expanded explanation of essentially what I said about CFGs and Markdown: http://roopc.net/posts/2014/markdown-cfg/