The Danish Financial Supervisory Authority (DFSA) has taken action against cryptocurrency service providers, specifically instructing Saxo Bank, a local investment bank, to divest its holdings in cryptocurrencies. The DFSA stated that holding cryptocurrencies as a hedge against trading risks is outside the legal business scope of financial institutions in Denmark, referring to section 24 of the country’s Financial Business Act.
Saxo Bank offers customers the opportunity to trade various cryptocurrency products on its platform, including crypto-linked exchange-traded funds and exchange-traded notes. The bank also maintains its own portfolio of cryptocurrency assets to offset market risk associated with its crypto products.
The DFSA noted that trading in crypto assets is not covered by the legal business area of financial institutions in Denmark, as outlined in Annex 1 of the Financial Business Act. Consequently, Saxo Bank has been ordered to dispose of its cryptocurrency holdings.
The DFSA mentioned the Markets in Crypto Assets regulation (MiCA) in its announcement, stating that MiCA regulations will only come into full effect from December 2024, leaving the crypto industry unregulated in the interim.
Saxo Bank’s global communications head, Lasse Lilholt, clarified that the DFSA’s order does not require the bank to halt its crypto offerings. However, the bank will carefully consider its response to the directive. Lilholt emphasized that Saxo Bank customers do not own the underlying cryptocurrencies but rather purchase financial products tracking their prices. The bank’s exposure to cryptocurrencies is largely mitigated through exchange-traded and cleared products, so the impact of the DFSA’s decision on its business and customers is expected to be minimal.
The DFSA’s decision reflects the uncertainty surrounding cryptocurrency regulations in Denmark. While cryptocurrencies like Bitcoin do not fall under any category of financial services in Denmark, the DFSA authorized the Danish crypto startup Januar to operate in 30 European Economic Area markets in April 2023. Additionally, the Supreme Court of Denmark issued two judgments in March regarding the taxable nature of Bitcoin sales under certain circumstances.
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