Saxo Bank ordered to delete cryptocurrency holdings by Denmark.

Financial regulators in Denmark are taking action against cryptocurrency service providers, stating that local banks are prohibited from holding cryptocurrency as a hedge against trading risks.

On July 4, the Danish Financial Supervisory Authority (DFSA) officially instructed Saxo Bank, a local investment bank, to divest its own cryptocurrency holdings.

The regulator stated that Saxo Bank’s involvement with crypto “falls outside the legal business scope of financial institutions,” referring to Section 24 of Denmark’s Financial Business Act.

According to the DFSA, Saxo Bank allows its customers to trade various cryptocurrency products on its platform. The bank also offers crypto-linked exchange-traded funds and exchange-traded notes, providing the opportunity to speculate on crypto assets.

Furthermore, Saxo Bank holds its own portfolio of cryptocurrency assets to offset the market risk associated with its crypto products, as stated by the DFSA.

Referring to Annex 1 of the Financial Business Act, the authority claims that trading in crypto assets does not fall within the legal business scope of financial institutions in Denmark. The DFSA stated:

“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.”

In its announcement, the DFSA also mentioned MiCA (Markets in Crypto-Assets), Europe’s regulation on crypto-assets. The regulator noted that the full implementation of MiCA regulations will begin in December 2024, leaving the area unregulated for now.

The DFSA’s order does not require Saxo Bank to cease its crypto offering, according to Lasse Lilholt, Saxo Bank’s global communications head, as reported by Cointelegraph.

“We will naturally consider the decision of the Financial Supervisory Authority and analyze it thoroughly to determine our response,” Lilholt stated. He further explained that Saxo Bank customers do not own the underlying cryptocurrency but rather purchase a financial product that tracks its price.

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Lilholt also mentioned that Saxo Bank holds a “very limited portfolio of cryptocurrencies” solely for hedging a small portion of the risk associated with facilitating crypto assets. He added:

“The majority of this exposure is mitigated through exchange-traded and cleared products. Therefore, the FSA’s decision will have minimal impact on our business, and our customers will not experience significant changes.”

It seems that financial authorities in Denmark have been somewhat uncertain about local cryptocurrency regulations. According to some legal sources, cryptocurrencies like Bitcoin (BTC) do not fall under any category of financial services in Denmark and are therefore not within the jurisdiction of the DFSA.

Despite this uncertainty, the DFSA granted authorization to the Danish crypto-related startup Januar to operate in 30 European Economic Area markets in April 2023. In March, the Supreme Court of Denmark made two judgments regarding whether the sale of Bitcoin under certain circumstances qualifies as a taxable event.

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