Danish financial regulators have gone after crypto service providers and declared that local banks are not allowed to hold cryptocurrencies to hedge transaction risks.
On July 4, the Danish Financial Supervisory Authority (DFSA) formally ordered Local investment bank Saxo Bank plans to divest its cryptocurrency holdings.
Citing Article 24 of the Danish Financial Business Act, the regulator said that Saxo Bank’s cryptocurrency activities are “outside the legal sphere of business of financial institutions.”
According to DFSA, Saxo Bank offers its clients the opportunity to trade a number of cryptocurrency products through its platform. The company also offers exchange-traded funds and exchange-traded bonds linked to several cryptocurrencies, the regulator said, adding that “it is possible to speculate on crypto assets.”
In addition, Saxo Bank has its own cryptocurrency asset portfolio, which is held as a hedge against the market risks associated with the bank’s crypto products, DFSA writes.
Citing Annex 1 of the Financial Industry Act, the authorities said trading in crypto assets does not appear to be subject to the legal field of business of Danish financial institutions. DFSA said:
“Based on the above, it is recognized that the trading of crypto assets in Saxo Bank’s own account is outside the legal scope of business of financial institutions. Based on this, Saxo Bank was ordered to dispose of its own crypto assets .”
In its announcement, the DFSA also mentioned European cryptocurrency market regulation known as MiCA. The regulator noted that the MiCA regulation will only be fully effective from December 2024, “thus, the region will remain unregulated for the time being,” the regulator added.
Saxo Bank’s head of global communications, Lasse Lilholt, told Cointelegraph that Saxo Bank will not stop offering cryptocurrencies due to an order from the FSA.
The representative said, “Of course, we are considering the Financial Supervisory Agency’s decision, and we will carefully read it and consider our response.” Saxo Bank customers do not own the underlying cryptocurrency, but instead purchase financial instruments that follow the price of the cryptocurrency.
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The spokesperson also said that Saxo Bank holds a “very limited portfolio of cryptocurrencies” only to hedge a small portion of the risks associated with promoting crypto assets. The representative added:
“Most of this exposure is mitigated through exchange-traded and cleared products. I never experience it.”
DFSA did not immediately respond to Cointelegraph’s request for comment.
Danish financial authorities appear to be somewhat uneasy about local cryptocurrency regulations.according to some laws sauceCryptocurrencies like Bitcoin (BTC) do not fall under any category of financial services in Denmark and are therefore not within the scope of DFSA jurisdiction.
Despite the uncertainty, the DFSA has approved Danish cryptocurrency startup Januar to operate in 30 European Economic Area markets in April 2023. Previously, the Danish Supreme Court issued two rulings on whether the sale of bitcoin under certain circumstances is taxable. March.
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