Saxo Bank Ordered by Denmark to Remove Cryptocurrency Holdings

Cryptocurrency Service Providers Targeted by Danish Financial Regulators

Financial regulators in Denmark have taken aim at cryptocurrency service providers, declaring that local banks are not allowed to hold digital assets such as Bitcoin, Ethereum, and other crypto currencies to hedge against trading risks.

On July 4, the Danish Financial Supervisory Authority (DFSA) issued a directive to Saxo bank, a local investment bank, to dispose of its crypto holdings.

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.

The DFSA noted that Saxo Bank provides its customers with the opportunity to trade various cryptocurrency products through its platform, as well as several crypto-linked exchange-traded funds and exchange-traded notes. This allows customers to speculate on crypto assets such as Voyager Crypto and Crypto.com.

Saxo Bank’s Crypto Assets and MiCA Regulation

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, according to the Dubai Financial Services Authority (DFSA). 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 also mentioned Europe’s Markets in Crypto Assets (MiCA) regulation, noting 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.

Crypto Regulations in Denmark

The Financial Supervisory Authority’s decision was taken into account by Saxo Bank, as a customer of which one does not possess the underlying cryptocurrency but rather buys a financial product that follows the price of the cryptocurrency.

A spokesperson from the bank stated that they keep a “very limited portfolio of cryptocurrencies”, which is only used to hedge a marginal amount of the risk related to crypto assets.

The DFSA did not respond to Cointelegraph’s request for comment. It appears that crypto regulations in Denmark are somewhat ambiguous, as some legal sources suggest that cryptocurrencies such as Bitcoin (BTC) do not fall into any of the financial services categories and are thus not subject to the DFSA’s supervision.

Despite uncertainty, the DFSA authorized the Danish crypto-related startup Januar to conduct business in 30 European Economic Area markets in April 2023. Previously, The Supreme Court of Denmark made two judgments on whether the sale of Bitcoin under certain circumstances qualifies as a taxable event in March. This ruling has been of particular interest to those in the crypto world, such as crypto.com, voyager crypto, and other crypto currency users.