Financial regulators in Denmark are going after cryptocurrency service providers, declaring that local banks cannot hold cryptocurrencies to protect against business risks.
On July 4, the Danish Financial Supervisory Authority (DFSA) officially tidy local investment bank Saxo Bank to dispose of its own cryptocurrency holdings.
The regulator said that Saxo Bank's crypto activity "falls outside the legal business area of โโfinancial institutions," citing section 24 of Denmark's Financial Business Act.
According to the DFSA, Saxo Bank offers its clients the opportunity to trade a number of cryptocurrency products through its platform. The firm also offers several crypto-linked ETFs and exchange-traded notes, the regulator noted, adding that โit is possible to speculate in crypto assets.โ
In addition, Saxo Bank has its own portfolio of cryptocurrency assets, which are held as hedges to offset market risk associated with the bank's cryptocurrency products, the DFSA wrote.
Citing Schedule 1 of the Financial Business Act, the authority said that crypto asset trading does not appear to be covered by the legal trading area of โโfinancial institutions in Denmark. The DFSA stated:
โBased on the above, it is found that Saxo Bank's trading of crypto assets on its own account is outside the legal trading area of โโfinancial institutions. On this basis, Saxo Bank is ordered to dispose of its own crypto asset holdings.โ
In the announcement, the DFSA also mentioned the European Crypto Asset Markets regulation known as MiCA. The regulator noted that the MiCA regulations will only come into effect in full from December 2024. โTherefore, the area remains unregulated for the time being,โ the regulator added.
The FSA order does not cause Saxo Bank to halt its cryptocurrency offering, Saxo's head of global communications Lasse Lilholt told Cointelegraph.
โNaturally, we take the decision of the Financial Supervisory Authority into account and will read it carefully to consider how we will respond to it,โ the representative noted. As a Saxo Bank customer, one does not own the underlying cryptocurrency, but rather purchases a financial product that tracks the price of the cryptocurrency.
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The spokesperson also noted that Saxo Bank has a โvery limited portfolio of cryptocurrenciesโ, only to cover a marginal proportion of the risk associated with facilitating crypto assets. The representative added:
โThe vast majority of this exposure is mitigated through exchange-traded and cleared products. Therefore, the FSA decision will have a very limited impact on our business and our customers will not experience significant changes."
The DFSA did not immediately respond to Cointelegraph's request for comment.
It seems that the Danish financial authorities have been somewhat unsure about local cryptocurrency regulations. according to some laws sourcescryptocurrencies like Bitcoin (BTC) do not belong to any category of financial services in Denmark and as such are not covered by the jurisdiction of the DFSA.
Despite the uncertainty, the DFSA Licensed Danish Crypto-Related Startup Januar to conduct business in 30 markets in the European Economic Area by April 2023. Formerly the Supreme Court of Denmark made two judgments about whether the sale of Bitcoin under certain circumstances qualifies as a taxable event in March.
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