The Dutch Authority for the Financial Markets (AFM) has raised an important alert regarding the risks associated with pump-and-dump schemes in the cryptocurrency market, coinciding with new regulations aimed at curbing such manipulative practices. The forthcoming Markets in Crypto-Assets Regulation (MiCAR), set to take effect on December 30, will prohibit these activities.
**AFM Raises Concerns Over Cryptocurrency Pump-and-Dump Schemes**
Last week, the AFM issued a cautionary statement about the threats posed by pump-and-dump schemes in the cryptocurrency realm, emphasizing the impending regulations designed to combat this type of market manipulation. The AFM remarked:
"Crypto pump-and-dump schemes constitute a method of market manipulation that can lead investors to suffer significant losses. Participation in and organization of such schemes will be outlawed under the new Markets in Crypto-Assets Regulation (MiCAR)."
The AFM elaborated on the mechanics of these schemes, wherein organizers artificially boost the prices of cryptocurrencies by disseminating false information, frequently via social media platforms.
“The new Markets in Crypto-Assets Regulation (MiCAR), which comes into effect on December 30, 2024, will outlaw pump-and-dump schemes. The AFM will oversee and enforce these regulations. In preparation for its upcoming oversight, the AFM has investigated three instances of market manipulation involving pump and dumps. By analyzing social media interactions and price volatility, we were able to discern a distinct pattern,” the regulatory body explained. The organizers typically cash out at inflated prices, leaving unsuspecting investors with substantial losses when the prices inevitably plunge.
Though MiCAR is anticipated to bolster protections for investors, the AFM cautioned that it will not completely eradicate all risks within the sector. The regulator emphasized:
"The Markets in Crypto-Assets Regulation (MiCAR) aims to enhance the maturity of the crypto industry and improve investor protection. Nonetheless, MiCAR will not eliminate all risks inherent in the crypto landscape."
The AFM advised consumers to thoroughly educate themselves before engaging in cryptocurrency trading and 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 warnings regarding pump-and-dump schemes and the forthcoming MiCAR regulations? Share your views in the comments section below.