The Dutch Authority for the Financial Markets (AFM) has issued a critical alert regarding the risks associated with pump-and-dump schemes within the cryptocurrency sector, coinciding with impending regulations aimed at curbing this form of market manipulation. The new Markets in Crypto-Assets Regulation (MiCAR), set to take effect on December 30, will outlaw these deceptive practices.
**AFM Raises Concerns Over Crypto Pump-and-Dump Schemes**
Last week, the AFM emphasized the serious threats posed by cryptocurrency pump-and-dump schemes, underscoring forthcoming regulations designed to combat such market manipulation tactics. The AFM stated:
“Crypto pump-and-dump schemes represent a type of market manipulation that can lead investors to significant losses. Under the upcoming Markets in Crypto-Assets Regulation (MiCAR), both organizing and participating in these schemes will be prohibited.”
The AFM elaborated on the mechanics of pump-and-dump schemes, explaining that perpetrators artificially boost cryptocurrency prices by disseminating false information, often via social media platforms.
“The new Markets in Crypto-Assets Regulation (MiCAR), which will come into effect on December 30, 2024, will outlaw pump-and-dump schemes. The AFM will be responsible for overseeing and enforcing this regulation. In preparation for our upcoming oversight, we have investigated three incidents of market manipulation related to pump and dumps. By analyzing social media interactions and price movements, we identified a distinct pattern,” the regulatory body pointed out. Organizers typically cash out at inflated prices, leaving investors with significant losses once the prices plummet.
While MiCAR is anticipated to enhance investor safeguards, the AFM cautioned that it will not eliminate all risks inherent in the crypto landscape. The agency highlighted:
“The Markets in Crypto-Assets Regulation (MiCAR) aims to raise the standard of maturity in the crypto sector and improve investor protection. However, it will not eradicate all risks associated with cryptocurrency trading.”
The AFM recommended that consumers educate themselves thoroughly before engaging in cryptocurrency transactions and advised them to invest only what they can afford to lose, reiterating that trading in cryptocurrencies remains highly speculative.
What are your thoughts on the AFM’s warning regarding pump-and-dump schemes and the upcoming MiCAR regulations? Share your opinions in the comments section below.
