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The post How MiCAR 2024 Aims to End Pump-and-Dump Cryptocurrency Schemes appeared first on Coinpedia Fintech News
In a recent development, the Dutch Authority for the Financial Markets has warned about the spate of investors being defrauded through pump-and-dump schemes in cryptocurrency. However, this manipulative practice will be formally prohibited by the Markets in Crypto-Assets Regulation (MiCAR) which should come into force on the 30th of December 2024.
AFM’s Warning on Pump-and-Dump Schemes
The AFM brought attention to pump-and-dump schemes, a form of market manipulation where organizers manipulate the price of a cryptocurrency by posting false information, often on social media. Having done this, any scrip they take up as an investment jumps to astronomical prices which they sell off, thus, causing the rest of the investors to incur steep losses when the price drops.
The AFM explained that pump-and-dump is a type of market manipulation that is dangerous to investors. What will however be unlawful is organizing as well as participating in such schemes through MiCAR.
How Pump-and-Dump Schemes Perpetrate
As mentioned by the AFM, these schemes are managed by building an illusion of the selected cryptocurrency. Any time there is enough activity, the organizers let the prices skyrocket and sell, making a handsome turnover at the cost of other normal users who incur losses when the bubble bursts.
AFM has conducted some investigations that it has outlined, certain manipulation patterns via social media activity and through price manipulation.
Combating Market Manipulation
The new MiCAR regulation that will be introduced in the future shall help improve the position of investors and enhance the transparency level of the crypto market. While the AFM has positively addressed the regulation, it needs to point out that MiCAR will not remove all risks of trading in cryptocurrencies alone.
The regulator added that while trading in cryptocurrency remains high risk, consumers must exercise caution, invest wisely, and avoid blindly rushing into making an investment in the digital asset.
The AFM seems to emphasize on the existing risks in the crypto market at a time when MiCAR is yet to be launched to fully respond to it. However, pump-and-dump schemes remain on the agenda, and the rules are clay portrayed only in the field of tightening.
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