AFM Warns Against Crypto Pump-and-Dump Scams as MiCA Regulation Approaches

• AFM to enforce MiCA starting Dec 30, targeting crypto pump-and-dump schemes in the EU.
• MiCA regulation aims to enhance transparency, increasing accountability in crypto exchanges.
• Concerns grow over potential centralization and industry exodus due to strict MiCA regulations.

The Dutch Authority for the Financial Markets (AFM) has recently shared its concern with the growth of pump-and-dump scams with cryptocurrencies. This comes when the Netherlands is set to implement the new Markets in Crypto Assets Regulation (MiCA) to eliminate such manipulations throughout the EU bloc.

The AFM emphasized its efforts to improve specific market transparency and integrity by combating such scams, which are detrimental to investor trust and the free market.

Pump and dump schemes are often techniques in which a person posts false and misleading information to increase the cryptocurrency price and create a sell signal. When the asset’s price is high, the manipulators dispose of their stocks, leading to a sharp price fall and considerable losses to the other investors.

The AFM’s protective strategy will try to protect investors by establishing a precedent for eliciting high levels of compliance and close monitoring of manipulation schemes once the rules under MiCA kick in from December 30.

EU’s MiCA Regulation for Crypto Market

By establishing MiCA, the EU can regulate the crypto market appropriately to protect its people and economies. MiCA aims to create a safer trading platform that would protect potential investors from being defrauded through pump-and-dump schemes and other practices.

As stated by the AFM, even though MiCA will greatly relieve the risks related to digital assets, perfection will not free the crypto sector from all kinds of possibilities. According to the regulation, crypto asset relations shall operate under strict rules for transparency, increasing the responsibility of crypto exchanges and other related services.

The AFM, as the supervisory authority, will be responsible for compliance with and enforcement of these regulations while emphasizing the role of trust and stability in the long-term development of the digital asset market.

MiCA Finalization Concerns

As the finalization of MiCA nears, there are worries about the unintended consequences that could affect it once implemented, such as market concentration and relocation of crypto firms. Some industry leaders believe that strict rules and regulations could force potential investors to seek places with less strict rules, like the Middle East.

The CEO and co-founder of Fideum, Anastasija Plotnikova, also expressed concerns that the new regulation might make the sphere even more centralized and shift towards the logic of financial systems. Such a change may reduce the level of competition and stifle the formation of new, robust, and effective services in Web3-related markets. Consequently, the AFM and European market regulators face the dilemma of ensuring proper monitoring of the new market entrants while preserving the principles of an innovative and open market environment.