Saxo Bank Ordered by DFSA to Sell Off Cryptocurrency Holdings

3:16 pm
July 5, 2023

Saxo Bank, a local investment bank in Denmark, has been instructed by the Danish Financial Supervisory Authority (DFSA) to dispose of its own cryptocurrency holdings. The DFSA has stated that holding cryptocurrency is outside the legal business scope of financial institutions, according to section 24 of the Danish Financial Business Act.

The DFSA’s order specifically targets Saxo Bank due to its cryptocurrency offering, which allows customers to trade various cryptocurrencies on its platform. The regulator also notes that Saxo Bank provides exchange-traded funds and exchange-traded notes linked to cryptocurrencies, enabling speculation on crypto assets.

In addition, the DFSA highlights that Saxo Bank has its own portfolio of bitcoin assets as a hedge against market risks associated with the bank’s cryptocurrency products. However, dealing in crypto-assets does not fall within the lawful business scope of Danish financial institutions, as stipulated in Annex 1 of the Financial Business Act.

As a result, the DFSA has ordered Saxo Bank to sell off its cryptocurrency holdings. The impact of this order on the bank’s business is expected to be minimal.

Cryptocurrency Service Providers in Denmark

The Danish financial regulators are cracking down on cryptocurrency service providers, clarifying that local banks are not permitted to hold cryptocurrencies for risk management purposes.

It remains to be seen how Saxo Bank will navigate its cryptocurrency offering, as customers do not own the underlying cryptocurrencies but instead purchase financial products that track the price of cryptocurrencies.

FAQ

  • Why has Saxo Bank been ordered to sell off its cryptocurrency holdings?
  • The Danish Financial Supervisory Authority (DFSA) has determined that holding cryptocurrencies falls outside the legal business scope of financial institutions, according to section 24 of the Danish Financial Business Act.

  • Why did the DFSA single out Saxo Bank?
  • Saxo Bank was specifically targeted because it provides customers with the option to trade various cryptocurrencies on its platform and offers exchange-traded funds and exchange-traded notes linked to cryptocurrencies, allowing speculation on crypto assets.

  • What impact will the DFSA’s order have on Saxo Bank’s business?
  • The order is not expected to have a significant impact on Saxo Bank’s business.

  • Are Danish banks allowed to hold cryptocurrencies as a form of risk management?
  • No, the Danish financial regulators have clarified that local banks are not permitted to hold cryptocurrencies for risk management purposes.


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