DFSA Orders Saxo Bank to Divest Crypto Holdings, Limited Impact Expected on Business and Customers
DFSA’s decision regarding Saxo Bank’s crypto holdings will minimally impact its business, and customers will not experience significant changes, according to the lender.
Denmark’s financial regulators are cracking down on cryptocurrency service providers, stating that local banks cannot hold cryptocurrency to mitigate trading risks.
On July 4, the Danish Financial Supervisory Authority (DFSA) officially instructed Saxo Bank, a local investment bank, to divest its crypto holdings.
The regulator stated that Saxo Bank’s involvement in crypto lies outside the legal scope of financial institutions, referring to section 24 of Denmark’s Financial Business Act.
According to the DFSA, Saxo Bank offers customers various cryptocurrency trading options through its platform. Additionally, it provides crypto-linked exchange-traded funds and exchange-traded notes, enabling speculation on crypto assets.
Furthermore, Saxo Bank holds its own portfolio of cryptocurrencies to hedge against market risks associated with its crypto products, as outlined by the DFSA.
The authority stated that the trading of crypto-assets does not seem to fall within the legal domain of financial institutions in Denmark, as per Annex 1 of the Financial Business Act. Consequently, Saxo Bank is required to divest its crypto holdings.
The DFSA also mentioned the Markets in Crypto Assets regulation, known as MiCA, which will only be fully effective from December 2024. The regulator added that the area remains unregulated for now.
“We will carefully analyze and consider the decision of the Financial Supervisory Authority in response,” noted the Saxo Bank representative. As a Saxo Bank customer, you don’t directly own the underlying cryptocurrency but purchase a financial product tied to its price.
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Additionally, the spokesperson emphasized that Saxo Bank holds a limited portfolio of cryptocurrencies solely for hedging against a small portion of the associated risk. The majority of this exposure is mitigated through exchange-traded and cleared products. Consequently, the DFSA’s decision will have a minimal impact on Saxo Bank’s business and customers won’t face significant changes.
It seems that Danish financial authorities have displayed uncertainty regarding local cryptocurrency regulations. Legal sources suggest that cryptocurrencies like Bitcoin do not fit into any financial service category in Denmark and are thus beyond the DFSA’s jurisdiction.
Despite the uncertainty, the DFSA authorized the Danish crypto startup Januar to operate in 30 European Economic Area markets in April 2023. In March, the Supreme Court of Denmark made two judgments on whether the sale of Bitcoin qualifies as a taxable event under certain circumstances.