Dutch Financial Regulator Warns of Crypto Pump-and-Dump Risks Ahead of New EU Rules

The Dutch Authority for the Financial Markets (AFM) has warned of the risks of "pump and dump" schemes in the cryptocurrency sector ahead of the introduction of new rules.

According to an AFM press release, the Markets in Cryptoassets Regulation (MiCA) will come into force on December 30, aiming to curb market manipulation in the European Union.

MiCA aims to improve transparency and market integrity by explicitly banning manipulative practices such as “pump and dump” schemes. The AFM will monitor the implementation and enforcement of these rules in the Netherlands. In the pipeline, the AFM has already investigated several cases of such schemes and intends to set strict regulatory precedents when MiCA becomes operational.

Pump and dump schemes involve artificially inflating the price of a cryptocurrency through misleading information, often disseminated via social media.

Promoters buy a large amount of the asset at a low price, create a hype to boost its value, and then sell the assets they own, leaving investors with devalued assets.

Although MiCA is seen as a step towards improving the maturity of the crypto sector, concerns remain. Anastasia Plotnikova, CEO of Fideum, suggested that strict regulations could drive Web3 companies out of Europe, possibly moving to the Middle East, and warned that MiCA could lead to greater centralization in the industry.