On July 4, 2023, the Danish Financial Supervisory Authority (Finanstilsynet) issued a directive to Saxo Bank, instructing the financial institution to divest its holdings in crypto assets. This move is based on the current legal framework, which prohibits banks from trading crypto assets on their own account.

Saxo Bank has been providing its clients with various cryptocurrency trading options through its platform. It offers a variety of crypto products, including ETFs (Exchange Traded Funds) and ETNs (Exchange Traded Notes), which track the evolution of crypto assets. In addition, the bank provides an opportunity for clients to speculate in crypto assets marketed as “cryptocurrency crosses.”

In addition to offering these services, Saxo Bank has been holding a portfolio of crypto assets. This portfolio serves as a hedge against market risks associated with the bank’s crypto product offerings.

However, according to the Danish Financial Business Act, an exhaustive list of permitted activities is provided for financial institutions, and trading in crypto assets is not on this list.

Currently, the area of ​​cryptocurrency trading remains unregulated. The Regulation on Cryptoactive Markets (MiCA), intended to regulate this matter, will not come into force until December 30, 2024.

The Danish FSA has raised concerns that unregulated trading in crypto assets could undermine confidence in the financial system. The FSA argues that legitimizing crypto asset trading without proper regulations is not justified, thus classifying this activity as an unacceptable ancillary banking operation.

Saxo Bank had been trading crypto assets on its own account as a means of hedging the risks associated with the provision of other financial products. This action, however, is considered inadmissible for Danish financial institutions under the current Financial Business Act.

Consequently, the Danish FSA has decided that Saxo Bank’s proprietary trading of crypto assets falls outside the permitted trading area for financial institutions. This has led to the directive for the bank to divest its crypto asset holdings.

Historically, Denmark has been seen as one of the most cryptocurrency-friendly nations globally, being one of the first jurisdictions to state its stance on the treatment of Bitcoin. The Central Bank of Denmark does not regulate Bitcoin and does not recognize the cryptocurrency as mainstream currency. Additionally, the Danish Financial Supervisory Authority does not regulate or prohibit the operation of cryptocurrency businesses, including Bitcoin operations, in the country.

However, this action against Saxo Bank may signal a potential shift in Denmark’s approach, signaling a move towards stricter crypto regulation.