The Dutch Authority for the Financial Markets (AFM) issued a warning about pump-and-dump schemes in the crypto market ahead of the Markets in Crypto-Assets Regulation (MiCA) coming into effect.
How pump-and-dump schemes typically work
In a pump-and-dump scheme, the price of a crypto token is artificially inflated (pumped) by spreading hype, mostly through social media. Once the price spikes, the perpetrators sell (dump) their holdings, pocketing profits and leaving unsuspecting investors stuck with worthless assets. The goal is to get as many people as possible to buy in, driving the price up. Organizers promise ridiculous returns, up to 800% and even 1000%+, bringing a sense of urgency. Once the price hits the desired number, the insiders dump their tokens, crashing the price.
AFM actions and MiCA implementation
The AFM claims it has been on high alert, looking into social media patterns and price trends. After analyzing a lot of cases, they said they were able to identify specific activities linked to these schemes, and they’re ready to enforce the new rules. The Netherlands’ Ministry of Finance kicked off consultations on MiCA earlier this year, wrapping up feedback on August 30 to make sure that the implementation fits local needs while sticking to EU rules.
Regulation and current situation in the Netherlands
On July 18, the Dutch National Bank (DNB) updated its rules for how banks handle crypto assets under the Capital Requirements Regulation (CRR3). There’s a temporary rule that lets banks hold some crypto assets, but they still need to keep enough capital on hand. The Netherlands has also released the Fifth Anti-Money Laundering Directive (5MLD) in its laws. Under this, crypto service providers are called “custodian wallet providers” and must register with the DNB if they work commercially or professionally in the country. This registration includes strict checks on who runs and owns these companies to make sure they follow anti-money laundering rules. Surveys show about 15% of the country’s population has traded or invested in crypto even with the uncertainty around regulations. The total market cap of cryptos in the Netherlands is around €30 billion, affected by global trends and local investor vibes. Bitcoin leads, making up almost 45% of the market.
With the MiCA coming into effect, the AFM is preparing to take strict measures to combat pump-and-dump schemes in the crypto market. This is part of a broader strategy to tighten regulation and enhance transparency of the cryptocurrency market in the Netherlands.
