Danish bank Saxo has been ordered by Denmark's financial regulator to shed its own crypto holdings, the authority announced on Wednesday.
The Danish Financial Supervisory Authority's (FSA) explained that it isn't legal for banks to conduct such activity as ancillary bank business for reasons of financial stability under current regulations.
"Saxo Bank A/S' trading in crypto assets for its own account has taken place in order to cover risks in connection with the offering of other financial products," the statement said. "However, this does not change the fact that the activity, in itself, is not permitted for Danish financial institutions ..."
The financial watchdog also said that since the European Union's crypto regulation, known as markets for cryptoassets regulation (MiCA), only comes into effect from 30 December 2024, the activity is unregulated for the time being.
"Unregulated trading in crypto-assets can create distrust in the financial system, and the Danish FSA considers that it would be unfounded to legitimize trading in crypto-assets," the statement said.
“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. 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," Saxo bank said in a statement.
"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," the statement added.
UPDATE (July 5, 2023, 11:46 UTC): Adds Saxo statement.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.