Key Takeaways:
- The Danish Financial Supervisory Authority (FSA) has ordered Saxo Bank to dispose of its crypto asset holdings due to concerns regarding the unregulated nature of crypto asset trading.
- Saxo Bank offered its customers various crypto asset products and held a crypto asset portfolio as a hedge against market risk.
- The Danish FSA asserts that trading in crypto assets is not covered under the current legal framework for financial institutions and could undermine trust in the financial system.
Saxo Bank, a prominent Danish financial institution, has been ordered by the Danish Financial Supervisory Authority (FSA) to dispose of its crypto asset holdings. This move comes as a response to the bank’s engagement in crypto asset trading through its platform.
The platform offers customers various crypto asset products, including Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs), under the term “cryptocurrency cross”. Saxo Bank had also been using its crypto asset portfolio as a hedge to mitigate market risk concerning its crypto products.
According to the Danish FSA, trading in crypto assets does not feature in Annex 1 of the Financial Business Act. It lists activities that are explicitly covered within the legal framework for financial institutions.
Moreover, the regulation on markets for crypto assets (MiCA) will only be entirely effective from December 30, 2024. Consequently, crypto asset trading remains unregulated at present.
The Danish FSA expresses concerns that unregulated trading in crypto assets may breed distrust in the financial system. The authority opines that legitimizing trading in crypto assets, under the current circumstances, would be unfounded.
Hence, they have deemed such activities as not acceptable as ancillary bank business, citing financial stability reasons as per section 24 of the Financial Business Act. Saxo Bank’s engagement in crypto asset trading was ostensibly aimed at covering risks linked to the bank’s offering of other financial products.
Nevertheless, the Danish FSA maintains that the activity is not permitted for Danish financial institutions according to §7, subsection 1, in the Financial Business Act. Consequently, the Danish FSA has concluded that Saxo Bank’s trading in crypto assets for its account falls outside the legal business domain of financial institutions.
This includes § 24 of the Financial Business Act. The regulator has therefore directed Saxo Bank to liquidate its holdings in crypto assets.
Source
https://www.finanstilsynet.dk/Tilsyn/Tilsynsreaktioner/Paabud/2023/Saxo_bank_050723
