The Dutch Authority for the Financial Markets (AFM) has issued a warning about cryptocurrency pump-and-dump schemes out of concern for market manipulation in relation to trading in cryptos.
The AFM noted that the new Markets in Crypto-Assets Regulation (MiCAR), which enters into effect on 30 December 2024, will ban pump-and-dump schemes. In preparation for its forthcoming supervision, the AFM investigated three cases of market manipulation by pump and dumps.
A pump-and-dump scheme typically works as follows:
Hanzo van Beusekom, Member of the Executive Board of the AFM, said: 'We are concerned about this widespread form of market manipulation. Pump and dump is about to be prohibited and the prevention and detection of market abuse is a leading priority of the AFM. The possible full benefits of crypto-based digital innovations can only be realised if there is enduring trust in the sector. We are therefore taking this opportunity to warn organisers and consumers at this stage.'
MiCAR will not eliminate all risks in the crypto sector. The AFM warns that trading in cryptos carries significant risks and advises consumers to ensure they are well-informed prior to engaging in it. In addition, they should only trade using their own money which they can spare.