The Dutch regulator, the AFM, warns users and organizers of being victimized by and organizing pump-and-dump schemes. It will take action against perpetrators once MiCA kicks off.
The Dutch Authority for the Financial Markets (AFM) issued a release mentioning how, with the full-fledged implementation of the Markets in Crypto Assets (MiCA), pump-and-dump schemes will officially become illegal. With that, the regulator seeks to make examples of those indulging in such scams to part Dutch crypto users from their assets. MiCA will take effect at the turn of the calendar on December 30.
“The participants try to inflate (pump) the price of large amounts of a crypto and then cash out by selling (dump) them,” the AFM said. “The new Markets in Crypto-Assets Regulation (MiCAR), which enters into effect on 30 December 2024, will ban pump-and-dump schemes.” As the AFM made this statement, it came out of multiple investigations into pump-and-dump schemes.
Pump-and-dump schemes ensure bad actors get rich off their holdings by gaining an advantage via marketing the tokens, while those buying the tokens are left with little to no value. Essentially, those marketing new tokens hype it up through various channels, most prominently social media. They also acquire huge chunks of the assets in the meantime. A combination of hype and large buying action sends the tokens’ prices surging or pumping. Crypto investors, seeing such price action, buy the tokens as the value steadily grows. The bad actors then sell all their holdings—dumping—which sends their values crashing. Unsuspecting users thus see their investments go crashing.
Hanzo van Beusekom, a Member of the Executive Board of the AFM, mentioned, “Pump and dump is about to be prohibited and the prevention and detection of market abuse is a leading priority of the AFM.” He added, “We are therefore taking this opportunity to warn organisers and consumers at this stage.” The regulator also warned investors that MiCA will not eliminate all risks associated with crypto markets—investors must be wary about what they put their money into.
Kraken Buys Dutch Crypto Broker as MiCA Implementation Gets Closer
With MiCA approaching, Kraken recently acquired the oldest Dutch crypto broker, Coin Meester (BCM), to expand its operations in the country and bolster its presence in the EU. Nevertheless, many feel crypto firms may move out of the bloc as the regulations take off, moving to regions with friendlier rules, like the United Arab Emirates.
