Denmark's financial authority has ordered Danish bank Saxo to liquidate its cryptocurrency assets. According to the Danish Financial Supervisory Authority (DFSA), the July order was issued due to the unregulated status of the bank's crypto asset holdings.
Saxo Bank, founded in 1992, focuses on online trading and investments. Just last month, Saxo Bank was awarded the designation of Systemically Important Financial Institution (SIFI) by the DFSA, which is given to financial institutions that are critical to the stability and effective operation of the nation's financial system.
The bank expanded into crypto trading in 2021, with crypto derivatives offerings for major crypto pairs.
While Saxo is not directly involved in cryptocurrency trading, it provides customers access to cryptocurrencies through exchange-traded products (ETPs) and 'other financial products that follow the price of the cryptocurrency'. The bank's own portfolio of crypto assets was used to hedge against crypto market risks.
The DFSA explained its position, referring to the country’s Financial Business Act, which regulates the legal business activities of financial institutions in Denmark.
Annex 1 of the Financial Business Act is an exhaustive list of activities that are clearly covered by the legal business area of financial institutions. Trading in crypto-assets does not appear in Annex 1 of the Financial Business Act.
Including this activity in the list would not be justifiable either, given that unregulated cryptocurrency trading could contribute to a general lack of faith in the financial system, the regulator said, adding that the activity was also deemed unfit for designation as an ancillary bank business due to worries about financial stability.
It is worth noting that the comprehensive regulation which could accommodate the bank's crypto-related activities, Markets in Crypto Assets (MiCA) of the European Union, was passed by EU Parliament in April this year and will fully go into effect by December 30, 2024. While the Danish regulator mentions it in the official ruling, it also adds that Denmark does not have any transitionary plan and the area will remain unregulated until then.
In a response to the ruling, a Saxo Bank representative told the cryptocurrency news site Blockworks that the Danish FSA's decision would have a "very limited impact" on the bank's operations, adding that Saxo owned only a modest portfolio of cryptocurrencies to offset the small risk associated with the facilitation of crypto assets for customers.
It looks like the bank has no plans to leave the crypto space, but wants to weather the transitionary period without unnecessary arguments with Danish authorities. We will Observe their preparations for the certification under MiCA.