AFM Warns Of Cryptocurrency Pump-And-Dump Risks Ahead Of MiCAR Implementation

According to Cointelegraph, the Dutch Authority for the Financial Markets (AFM) has issued a warning about the risks associated with cryptocurrency pump-and-dump schemes as new regulations are set to be implemented. The Markets in Crypto-Assets Regulation (MiCAR) will come into effect on December 30, aiming to prohibit market manipulation practices such as pump-and-dump schemes within the European Union. The AFM will be responsible for supervising and enforcing these new regulations in the Netherlands. The MiCAR regulation is designed to enhance transparency and market integrity in the crypto sector by explicitly banning manipulative practices. The AFM has been investigating several cases of pump-and-dump schemes in recent months and plans to enforce the new regulations strictly once MiCAR is in effect. A pump-and-dump scheme involves artificially inflating the price of an asset, such as a cryptocurrency, by spreading misleading or exaggerated information, often through social media. Promoters buy a large amount of the asset at a low price, hype it up to encourage public participation at higher prices, and then sell their holdings once the price is inflated, leaving investors with devalued assets. Hanzo van Beusekom, a member of the AFM’s executive board, stated that pump-and-dump schemes undermine trust in the crypto market, which is essential for the long-term potential of digital assets. The AFM’s alignment with Europe’s upcoming MiCAR bill is expected, but the regulatory framework could lead to an exodus of Web3 firms to the Middle East. Anastasija Plotnikova, CEO and co-founder of Fideum, expressed concerns that the regulation could lead to centralization and make the Web3 industry more akin to traditional finance.