Key Points
- The Dutch Authority for the Financial Markets (AFM) warns of widespread cryptocurrency market manipulation, specifically pump-and-dump schemes, ahead of new EU regulations set to take effect on December 30, 2024.
- AFM board member Hanzo van Beusekom emphasizes the regulator’s concern, stating that preventing and detecting market abuse is a top priority to build trust in the crypto sector.
AFM Prepares for New Regulatory Powers
The Dutch financial regulator is gearing up for a significant expansion of its oversight in the cryptocurrency market. With the impending implementation of the Markets in Crypto-Assets Regulation (MiCAR) on December 30, 2024, the AFM is set to gain new powers to combat market manipulation in the crypto space.
In preparation for this expanded role, the AFM has conducted investigations into three specific cases of pump-and-dump schemes. By analyzing social media activity and price fluctuations, the regulator has identified a distinct pattern that characterizes these manipulative practices.
Anatomy of a Crypto Pump-and-Dump
The AFM’s press release outlines a typical pump-and-dump operation, providing valuable insights for investors:
- Organizers select a cryptocurrency and accumulate large quantities at low prices.
- Information about the chosen crypto is spread via social media, often using buzzwords like “pumping,” “to the moon,” and “FOMO.”
- The general public, enticed by promises of extreme returns, buys in, driving up the price.
- Organizers sell their holdings at inflated prices, realizing substantial profits.
- The price collapses, leaving consumers with significant losses.
This detailed breakdown serves as a warning to potential victims and highlights the sophistication of these schemes.
Regulatory Outlook and Investor Caution
While the upcoming MiCAR regulation aims to increase the maturity of the crypto sector and enhance investor protection, the AFM stresses that it will not eliminate all risks. Hanzo van Beusekom’s statement underscores the regulator’s commitment to fostering trust in the industry through vigilant oversight.
However, the AFM maintains its cautionary stance, advising consumers to be well-informed before engaging in crypto trading and to only use funds they can afford to lose. This balanced approach reflects the ongoing challenges in regulating the rapidly evolving cryptocurrency landscape.
As the December 30 deadline approaches, market participants and investors alike will be watching closely to see how these new regulations reshape the European crypto market and what impact they may have on global cryptocurrency trading practices.
