The Danish regulator orders Saxo Bank to divest its cryptoasset holdings as it violates the country’s prohibition on banks trading cryptoassets for their own account.
- Danish regulator orders Saxo Bank to divest its cryptoasset holdings due to the prohibition on banks trading cryptoassets for their own account.
- Saxo Bank offers various crypto trading options, including ETFs, ETNs, and “cryptocurrency crosses” on its platform.
- Denmark’s current regulatory framework does not permit trading in cryptoassets by financial institutions, and the sector remains unregulated.
- Concerns about unregulated crypto trading undermining trust in the financial system lead to the directive for Saxo Bank to divest its holdings.
The Danish Financial Supervisory Authority (Finanstilsynet) has issued a directive to Saxo Bank, a prominent financial institution, ordering it to divest its holdings in cryptoassets. The regulatory move is based on Denmark’s current legal framework, which prohibits banks from trading cryptoassets for their own account.
Danish financial watchdog FSA has ordered its own bank, Saxo Bank, to sell its cryptocurrencies.
— whalechart (@WhaleChart) July 5, 2023
Crypto Trading Offerings by Saxo Bank
Saxo Bank has been actively offering various crypto trading options to its customers through its platform. It enables customers to engage in crypto trading through products such as exchange traded funds (ETFs) and exchange traded notes (ETNs), which track the performance of cryptoassets. Furthermore, the bank allows customers to speculate on cryptoassets marketed as “cryptocurrency crosses.”
Hedging Strategy and Regulatory Framework in Denmark
In addition to its trading services, Saxo Bank has also maintained a cryptoasset portfolio to hedge against market risks associated with its crypto product offerings. However, the Danish Financial Business Act does not include trading in cryptoassets as a permitted activity for financial institutions.
Currently, the crypto trading sector in Denmark remains unregulated. The Regulation on Markets in Cryptoassets (MiCA), which aims to introduce regulatory measures, will only fully take effect on December 30, 2024.
Concerns about Unregulated Trading in Cryptoassets
The Danish Financial Supervisory Authority has expressed concerns that unregulated trading in cryptoassets could potentially undermine trust in the financial system. The authority argues that legitimizing trading without proper regulations would be unwarranted, categorizing such activity as an unacceptable ancillary banking operation.
Saxo Bank’s trading in cryptoassets for its own account was primarily intended as a risk management strategy. However, under the current Financial Business Act, this practice is not allowed for Danish financial institutions.
Consequently, the Danish Financial Supervisory Authority has determined that Saxo Bank’s trading in cryptoassets for its own account falls outside the permitted business area for financial institutions. As a result, the bank has been instructed to divest its holdings in cryptoassets.
Denmark has long been considered one of the most crypto-friendly nations globally. It was among the first jurisdictions to establish its position on the treatment of Bitcoin. The Danish Central Bank does not regulate Bitcoin and does not recognize cryptocurrency as conventional currency. Additionally, the Financial Supervisory Authority of Denmark does not regulate or prohibit cryptocurrency businesses, including Bitcoin operations, within the country.
However, this recent action taken against Saxo Bank suggests a potential change in Denmark’s approach to crypto regulation, signaling a shift towards stricter oversight in the future.