DFSA claims Saxo Bank's crypto activities lie "outside of the legal business area of financial institutions."
The Danish Financial Supervisory Authority (DFSA), the financial regulatory authority of the Danish government responsible for the regulation of financial markets in the country, has ordered local investment bank Saxo Bank to offload its crypto holdings.
The regulatory body argued that Saxo Bank's activities with cryptocurrency lie "outside of the legal business area of financial institutions." This assertion is based on section 24 of Denmark's Financial Business Act.
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It is worth noting that, recently, Danish financial regulators have decreed that local banks are not permitted to keep cryptocurrency as a hedge against trading liabilities.
In its report, DFSA stated that Saxo Bank enables its clients to trade various cryptocurrency products and provides a range of crypto-linked exchange-traded funds and notes. The DFSA also noted that Saxo Bank has a portfolio of cryptocurrency assets meant to counterbalance the market risk linked to the bank's crypto offerings.
The authority drew on Annex 1 of the Financial Business Act, stating that crypto asset trading does not seem to fall under the legal scope of financial institutions' business in Denmark.
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.
However, it appears that Saxo Bank is not preparing to discontinue its crypto offerings. When asked about the matter, Saxo spokesperson noted:
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 DFSA's announcement also referenced the forthcoming Europe's Markets in Crypto Assets regulation (MiCA), which will take effect on December 2024. However, until then, this crypto industry in Denmark remains unregulated, the regulator clarified.
Recent developments highlight an ongoing ambiguity in Denmark's regulatory stance towards cryptocurrencies. Although the DFSA has ordered Saxo Bank to liquidate its crypto assets, the impact of this decision on the bank and its customers is expected to be minimal.
