Financial regulators in Denmark are coming after cryptocurrency service providers, declaring that local banks are not allowed to hold cryptocurrency to hedge against trading risks.
On July 4, the Danish Financial Supervisory Authority (DFSA) officially ordered the local investment bank Saxo bank to dispose of its own holdings in crypto.
The regulator said that Saxo Bank’s crypto activity “lies outside of the legal business area of financial institutions,” citing section 24 of the Denmark’s Financial Business Act.
According to the DFSA, Saxo Bank offers its customers the opportunity to trade a number of cryptocurrency products through its platform. The firm also offers several crypto-linked exchange-traded funds and exchange-traded notes, the regulator noted, adding that “it is possible to speculate on crypto assets.”
Additionally, Saxo Bank has its own portfolio of cryptocurrency assets, which are held as a hedge to offset the market risk associated with the bank’s crypto products, the DFSA wrote.
Citing Annex 1 of the Financial Business Act, the authority said that trading in crypto-assets does not appear to be covered by the legal business area of financial institutions in Denmark. The DFSA stated:
“Based on the above, Saxo Bank’s trading in crypto assets for its own account is found to be outside the legal business area of financial institutions. On this basis, Saxo Bank is ordered to dispose of its own holdings of crypto assets.”
In the announcement, the DFSA also mentioned Europe’s Markets in Crypto Assets regulation known as MiCA. The regulator noted that MiCA regulations will only take effect in its entirety starting from December 2024. “The area thus remains unregulated for the time being,” the regulator added.
The order from the FSA doesn’t make Saxo Bank stop its crypto offering, Saxo global communications head Lasse Lilholt told Cointelegraph.
“We naturally take the decision of the Financial Supervisory Authority into account and will read it thoroughly to consider how we otherwise respond to it,” the representative noted. As a Saxo Bank customer, one does not own the underlying cryptocurrency but instead buys a financial product that follows the price of the cryptocurrency.
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The spokesperson also noted Saxo Bank holds a “very limited portfolio of cryptocurrencies,” solely to hedge a marginal proportion of risk associated…
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