The Dutch Financial Markets Authority is stepping up its warnings about cryptocurrency pump-and-dump schemes, vowing to strictly enforce the EU’s Markets in Cryptoassets Regulation when it comes into force on December 30.

On September 26, the Dutch Financial Market Authority (AFM) issued a warning about the increased risk of cryptocurrency pump-and-dump schemes amid the impending entry into force of the European Union (EU) Regulation on Markets in Cryptoassets (MiCA). According to an official press release, the AFM will closely monitor and strictly enforce this new regulation in the Netherlands, aiming to protect investors and increase transparency in the cryptocurrency market.

MiCA, which is scheduled to come into effect on December 30, 2024, is expected to improve the integrity of the cryptocurrency market by prohibiting manipulative practices such as “pump and dump” trading, a common practice in which institutional groups buy large amounts of digital assets at low prices, then spread false or exaggerated information to create artificial interest and drive prices higher. When prices peak, they dump their holdings, reaping huge profits while retail investors suffer the consequences.

AFM proactively investigates and prepares for MiCA enforcement

In preparation for the implementation of MiCA, the AFM has been proactively investigating a number of cases involving pump-and-dump schemes in recent months. AFM Executive Board Member Hanzo van Beusekom stressed that these schemes “undermine trust” in the cryptocurrency market, which negatively affects the long-term growth potential of digital assets.

However, the AFM also acknowledged that MiCA, while an important step forward, will not be able to completely eliminate all risks in the cryptocurrency sector. Therefore, the agency recommends that investors exercise caution and do their due diligence before entering the market, and be wary of unrealistic promises of returns.

The AFM’s compliance with the EU’s upcoming MiCA regulation is seen as a positive move, demonstrating the Netherlands’ commitment to creating a more transparent and secure investment environment for the cryptocurrency market. However, there are also concerns that the new legal framework could prompt some Web3 companies to move their operations to less regulated regions, such as the Middle East.

In an interview with Cointelegraph, Anastasija Plotnikova, CEO and co-founder of Fideum, suggested that MiCA could cause a centralization of power in the industry, leading to massive consolidation and making Web3 more similar to traditional finance.