AFM explained that these schemes typically artificially inflate the price of a crypto asset by spreading misinformation or misleading statements on social media. For example, promoters buy a large volume of a token at a low rate, and then “spin” and advertise it, encouraging traders and investors to buy this crypto asset. The organizer of the pump and dump scheme then sells the token higher, making a significant profit, and investors are left with assets that no longer have any value.
The department noted that the bill on regulation of cryptocurrencies in the European Union (MiCA), which comes into force on December 30, will combat such practices. In preparation for the implementation of MiCA, AFM has investigated several pump and dump incidents in recent months.
The regulator analyzed activity on social networks and fluctuations in token rates. This has revealed a pattern and the department intends to set a precedent for strict enforcement of the MiCA once the law comes into force. AFM emphasized: MiCA should strengthen the protection of investors in cryptocurrencies, but it will not be able to eliminate all risks in the crypto industry.
“Before investing in any token, find out more information about the project. Invest only money you can afford to lose, as cryptocurrency trading is highly speculative. Even MiCA is not able to completely protect you from all the risks of the crypto industry,” the regulator said.
Last year, AFM chairwoman Laura van Geest called the MiCA law too “soft” for regulating cryptocurrencies compared to rules for traditional finance. In March, the Dutch Central Bank (DNB) fined crypto exchange Crypto.com $3.1 million for providing services without registration.
Source: Bits
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