Dutch regulator warns of pump-and-dump risks

The Dutch Authority for the Financial Markets (AFM) has issued a warning regarding the dangers of pump-and-dump schemes in the cryptocurrency market as the implementation of the Markets in Crypto-Assets Regulation (MiCA) approaches. 

MiCA is scheduled to take effect on December 30 and is aimed at regulating the European crypto market more strictly. 

According to the AFM, MiCA will explicitly prohibit market manipulation practices, including pump-and-dump schemes. 

These schemes involve artificially inflating the price of an asset through misleading or exaggerated information, usually spread on social media. 

Once the asset's price rises, those who initiated the scheme sell their holdings, leaving unsuspecting investors with significant losses. 

In recent months, the AFM has investigated several cases of pump-and-dump schemes, signaling its intention to enforce MiCA regulations strictly when they take effect. 

"Pump-and-dump schemes undermine trust, which is essential for the long-term potential of digital assets," said Hanzo van Beusekom, an executive board member of the AFM. 

MiCA’s goal is to enhance transparency and market integrity in the European crypto sector, ensuring better investor protection. 

However, van Beusekom cautioned that while MiCA will improve market conditions, it "will not eliminate all risks in the crypto sector." 

Despite the positive intentions behind MiCA, some industry experts have expressed concerns about its impact on the Web3 industry. 

Anastasija Plotnikova, CEO and co-founder of Fideum, suggested that the new regulatory framework could result in consolidation within the industry and potentially push firms to relocate to regions like the Middle East to avoid regulatory burdens.