In a recent development, the Danish Financial Supervisory Authority (DFSA) has instructed Saxo Bank, a local investment bank, to divest its holdings in cryptocurrencies. The DFSA stated that the bank’s involvement in crypto assets falls outside the legal business area of financial institutions, referencing section 24 of Denmark’s Financial Business Act.
Saxo Bank currently offers its customers the ability to trade various cryptocurrency products on its platform, including crypto-linked exchange-traded funds and exchange-traded notes. Additionally, the bank holds its own portfolio of cryptocurrencies to offset market risks associated with its crypto offerings.
The DFSA highlighted that trading in crypto-assets is not covered under the regulatory framework of financial institutions in Denmark, citing Annex 1 of the Financial Business Act. Consequently, Saxo Bank has been directed to dispose of its own holdings of crypto assets.
The DFSA also noted that the forthcoming implementation of Europe’s Markets in Crypto Assets regulation, known as MiCA, will only take effect in its entirety starting from December 2024. As a result, the current regulatory landscape remains unregulated for the time being.
Despite the order from the DFSA, Saxo Bank clarified that it will continue to offer crypto-related services. However, the bank emphasized that its customers do not directly own the underlying cryptocurrencies but rather purchase financial products tied to their prices.
Saxo Bank’s global communications head assured that the DFSA’s decision would have a minimal impact on the bank’s business since the majority of its exposure to crypto assets is mitigated through exchange-traded and cleared products. Customers are not expected to experience significant changes due to this regulatory requirement.
It is worth noting that Danish financial authorities have exhibited some uncertainty regarding local cryptocurrency regulations. While cryptocurrencies like Bitcoin do not fall under any category of financial services in Denmark, the DFSA did authorize a Danish crypto-related startup, Januar, to conduct business in 30 European Economic Area markets earlier this year.
Overall, the DFSA’s order to Saxo Bank reflects ongoing efforts by financial regulators to define and regulate cryptocurrency activities within established frameworks. This decision underscores the need for clear guidelines and regulations surrounding cryptocurrencies in the banking industry.