Denmark’s financial watchdog is going after cryptocurrency service providers, announcing that local banks are not allowed to hold cryptocurrencies to hedge their trades.
On July 4, the Danish Financial Supervisory Authority (DFSA) officially ordered Local investment bank Saxo Bank will sell its cryptocurrency holdings.
Citing Article 24 of Denmark’s Financial Services Act, the regulator said Saxo Bank’s cryptocurrency activities “do not fall within the legal field of business of a financial institution.”
According to the DFSA, Saxo Bank offers clients the opportunity to trade multiple cryptocurrency products through its platform. The firm also offers a variety of cryptocurrency-linked exchange-traded funds and exchange-traded notes, the regulator noted, adding that “speculation on cryptoassets is possible.”
In addition, the DFSA wrote that Saxo Bank maintains its own portfolio of cryptocurrency assets, which serve as hedging instruments to offset the market risk associated with the bank’s crypto products.
Citing Annex 1 of the Financial Business Act, the agency stated that trading in crypto assets does not appear to be within the legal scope of business of Danish financial institutions. DFSA stated:
To sum up, Saxo Bank’s behavior of conducting encrypted asset transactions with its own accounts does not fall within the legal business scope of financial institutions. On this basis, Saxo Bank was ordered to dispose of its own crypto holdings. “
In the announcement, the DFSA also referred to the European Market Regulation for Cryptoassets (MiCA). The regulator noted that the MiCA regulations will come into full effect in December 2024. “As such, the sector remains unregulated for the time being,” the watchdog added.
Saxo Bank’s head of global communications, Lasse Lilholt, told Cointelegraph that the FSA’s order will not stop Saxo Bank from its cryptocurrency offerings.
The representative noted: “We naturally consider the decision of the financial regulator and will read it carefully to consider how we respond.” A financial product with currency prices.
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The spokesperson also noted that Saxo Bank holds a “very limited cryptocurrency portfolio” only to hedge against a small portion of the risks associated with the facilitation of crypto assets. The representative added:
“The vast majority of exposures are mitigated through exchange-traded and cleared products. As such, the FSA decision has very limited impact on our business and our clients will not experience any material changes.”
The DFSA did not immediately respond to Cointelegraph’s request for comment.
Denmark’s financial authorities appear to be somewhat uncertain about local cryptocurrency regulations.according to some laws sourcecryptocurrencies like Bitcoin (BTC) do not fall under any category of financial services in Denmark and are therefore not subject to DFSA jurisdiction.
Despite the uncertainty, the DFSA authorized Danish crypto-related startup Januar to operate in 30 EEA markets in April 2023. Previously, Denmark’s Supreme Court handed down two judgments on whether the sale of bitcoins in certain circumstances would qualify as a taxable event in March.
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