Saxo Bank ordered to dispose of crypto holdings by Denmark’s DFSA

• The DFSA ordered the Saxo Bank to dispose of its own holdings in crypto.
• The Financial regulators in Denmark have said that local banks are not allowed to hold crypto to hedge against trading risks.
• DFSA’s order concerning Saxo Bank’s crypto holdings will have little impact on the bank’s business.

Local investment bank Saxo Bank has received a formal order from the Danish Financial Supervisory Authority (DFSA) directing it to dispose of its own cryptocurrency holdings.

According to the regulator, Saxo Bank’s cryptocurrency activity “lies outside of the legal business area of financial institutions,” citing section 24 of the Danish Financial Business Act.

Cryptocurrency service providers in Denmark

Danish financial regulators are going after cryptocurrency service providers, saying that local banks are not allowed to hold cryptocurrencies as a form of risk management.

Pinpointing why it singled out Saxo Bank, the DFSA claims that Saxo Bank gives its customers the option to trade a variety of cryptocurrencies on its platform. The regulator stated that the company also provides a number of exchange-traded funds and exchange-traded notes that are linked to cryptocurrencies, adding that “it is possible to speculate on crypto assets.”

The DFSA also noted that Saxo Bank has its own portfolio of bitcoin assets, which is kept as a hedge to counteract the market risk connected to the bank’s cryptocurrency products. The regulator cited Annex 1 of the Financial Business Act in stating that dealing in crypto-assets does not appear to be under the lawful business scope of Danish financial institutions.

Based on the above reasons, 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.”

It will be interesting to see how Saxo Bank will move ahead with its crypto offering seeing that their customers do not own underlying cryptocurrencies but instead buys financial products that follow the price of cryptocurrencies.