Saxo Bank Asked To Stop Crypto-Related Activities By Danish Regulator

Key Points:

• The Danish Financial Supervisory Authority has ruled that Saxo Bank’s proprietary cryptocurrency transactions are not within the legal business scope of financial institutions.
• Unregulated cryptocurrency trading can create distrust in the financial system, and the authority believes there is no justification for legitimizing such trading.
• Saxo Bank has been ordered to dispose of its crypto holdings, and new regulations for crypto markets will be implemented by the end of 2024.

According to Bloomberg, the Danish Financial Supervisory Authority decided that Saxo Bank’s crypto asset transactions for its own account did not fall within the legal business scope of financial institutions, and unregulated encrypted asset transactions may cause distrust in the financial system, and the Danish Financial Services Authority believes that legalizing crypto asset trading is unnecessary.

As a result, this activity is not acceptable as an auxiliary banking company for financial stability considerations (see section 24 of the Financial Services Act). Moreover, Saxo Bank maintains a portfolio of cryptoassets as a hedging mechanism to counter the market risk linked with the bank’s cryptoasset products. Saxo Bank was obliged to sell its own crypto assets on this grounds.

The new laws governing crypto markets will not go into effect until the end of 2024, thus, the sector will remain uncontrolled for the time being, according to the FSA.

“Unregulated trading in cryptoassets can create distrust in the financial system, and the Danish FSA believes it would be unfounded to legitimize trading in cryptoassets,” the agency stated.

Saxo Bank provides its clients with the ability to trade a variety of crypto asset products through the bank’s platform. On the one hand, there are ETFs (Exchange Traded Funds) and ETNs (Exchange Traded Notes) that track the growth of cryptoassets, while on the other, it is possible to bet on cryptoassets, which are advertised as “cryptocurrency cross.”

The Copenhagen-based bank is under increased regulatory scrutiny after being designated as a systemically significant financial institution for the first time last month.

The legislation on cryptoasset markets (MiCA) will not be fully implemented until December 30, 2024. Unregulated trade in crypto-assets might cause mistrust in the financial system, and the Danish FSA believes that legitimizing trading in crypto-assets would be unwarranted. As a result, the activity is deemed unsuitable for supplementary bank operations on grounds of financial stability.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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Harold

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