According to the lender, the DFSA’s judgment regarding Saxo Bank’s cryptocurrency holdings will have “very limited impact” on its operations and won’t significantly affect its clients.
Danish financial regulators have taken a stance against bitcoin service providers, stating explicitly that it is forbidden for local banks to store cryptocurrency to reduce trading risks. This action indicates regulatory authorities’ worries about financial institutions’ involvement in the cryptocurrency area.
A local investment bank, Saxo Bank, was given official instructions by the Danish Financial Supervisory Authority (DFSA) on July 4th to sell all of its cryptocurrency assets. In its statement, the DFSA cited section 24 of Denmark’s Financial Business Act to argue that Saxo Bank’s dealings with cryptocurrency are illegal and outside the purview of financial institutions.
The DFSA claims that Saxo Bank gives its customers the option to trade a variety of cryptocurrencies on its platform. The bank also offers exchange-traded notes and exchange-traded funds that are tied to cryptocurrency, allowing for cryptocurrency asset speculation. Saxo Bank also maintains its own portfolio of cryptocurrency assets to protect itself against the market risk related to its cryptocurrency products.
The DFSA stated that trading in crypto assets does not fit under the lawful business activities of Danish financial institutions, citing Annex 1 of the Financial Business Act. The regulator stated that the market for crypto assets is now unregulated, and the upcoming Europe’s Markets in Crypto Assets regulation (MiCA) won’t take full effect until December 2024.
According to Lasse Lilholt, head of global communications at Saxo, the DFSA’s order does not oblige Saxo Bank to stop offering cryptocurrency. However, the bank will carefully assess the DFSA’s choice before deciding how to react. It is important to note that consumers who use Saxo Bank’s cryptocurrency products do not actually own the underlying cryptocurrencies; rather, they buy financial products that monitor their price changes.
This regulatory move serves as a reminder of the increased scrutiny financial institutions engaged in the cryptocurrency industry are subjected to as authorities work to preserve market stability and safeguard investors. The DFSA’s decision to require Saxo Bank to sell its crypto holdings underlines the regulator’s worries about the dangers of having financial institutions hold crypto assets.