In anticipation of MiCA’s implementation in December, the Dutch AFM issued cautionary statements regarding crypto market manipulation, with a particular emphasis on pump-and-dump schemes.
The Dutch Authority for the Financial Markets (AFM) issued a warning regarding the potential hazards of cryptocurrency pump-and-dump schemes in anticipation of forthcoming regulations.
The Markets in Crypto-Assets Regulation (MiCA) will be implemented on December 30, as indicated by an official AFM press release.
The European Union will not be able to use market influence schemes like “pump and dump” schemes after MiCA is passed.
AFM will be responsible for the supervision and enforcement of the new regulations in the Netherlands. MiCA’s objective is to enhance market integrity and transparency in the cryptocurrency sector by prohibiting manipulative practices such as pump-and-dump schemes.
The Markets in Crypto-Assets Regulation (MiCAR) is intended to improve the maturity of the crypto sector and to strengthen investor protection. Nevertheless, MiCAR will not completely mitigate all risks in the cryptocurrency sector.
In anticipation of MiCA, the AFM has conducted investigations into numerous instances of pump-and-dump schemes in recent months and is committed to establishing a precedent for rigorous enforcement upon MiCA’s implementation.
A pump-and-dump scheme is a strategy that involves the spread of exaggerated or misleading information across social media platforms in order to artificially inflate the price of an asset, such as a cryptocurrency.
Promoters purchase a substantial quantity of the pump-and-dump scheme crypto asset at a low price and use promotional phrases to incentivize public participation at higher prices.
The organizers of the scheme sell their assets (dump them) after the price has been inflated, resulting in substantial profits for themselves, but at the expense of investors who are left with devalued holdings.
According to Hanzo van Beusekom, a member of the AFM’s executive council, pump-and-dump strategies “undermine trust” in the crypto market, which is “essential for the long-term potential of digital assets.”
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