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(Kitco News) - Operation Chokepoint 2.0 now appears to have spread beyond the borders of the U.S. as authorities in Denmark have ordered local banks to divest from their cryptocurrency holdings, with regulators saying that trading cryptocurrencies is “outside the legal scope of banks.”
The Danish Financial Superior Authority (DFSA) posted the injunction order on Wednesday, saying that Saxo Bank’s “trading in crypto assets at its own expense is found to be outside the legal scope of banks, including [section] 24 of the Financial Business Act. Against this background, Saxo Bank is required to dispose of its own inventory of crypto assets.”
Saxo Bank holds cryptocurrency as a way to hedge against trading risks associated with “crypto-active” products offered to clients through the bank, which includes exchange-traded funds (ETFs), and exchange-traded notes (ETNs). It also offers direct access through “cryptocurrency crosses,” which are trading products that track the price of a cryptocurrency versus a specific fiat currency.
The Danish regulator said that trading in crypto-assets does not appear to be covered by the legal business area of financial institutions in Denmark.
“Appendix 1 of the Financial Business Act is an exhaustive list of activities that are clearly covered by the legal scope of financial institutions,” the DFSA said. “Trading in crypto assets is not stated in Appendix 1 of the Financial Business Act.”
The DFSA noted that while the Markets in Crypto Assets (MiCA) regulations will make the holding and trading of digital assets legal, it doesn’t go into effect until December 30, 2024, and at this time, cryptocurrencies are “still unregulated.”
“Unregulated trading in crypto assets can create distrust of the financial system, and the Danish Financial Supervisory Authority finds that it would be unfounded to legitimize trading in crypto assets,” the regulator said. “Thus, the activity is also not found to be acceptable as ancillary banking for the sake of financial stability."
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| EU market regulator warns crypto remains unregulated until full MiCA implementation |
According to Saxo global communications head Lasse Liholt, the order from the DFSA does not relate to the bank's crypto offering and won’t force it to stop offering access.
“We naturally take the decision of the Financial Supervisory Authority into account and will read it thoroughly to consider how we otherwise respond to it,” Liholt said in a statement shared with Kitco Crypto. He highlighted that Saxo Bank customers do not own the underlying cryptocurrency, but rather a financial product that tracks the price of the digital asset.
“With regards to this, we have held a very limited portfolio of cryptocurrencies, solely to hedge a very marginal proportion of risk associated with the facilitation of crypto assets,” Liholt added. “The vast majority of this exposure is mitigated through exchange-traded and cleared products. Therefore, the FSA's decision will have a very limited impact on our business, and our customers will not experience any significant changes.”
