Denmark’s financial regulator, the Danish Financial Supervisory Authority (FSA), has ordered Saxo Bank, one of Europe’s largest online brokers, to liquidate its cryptocurrency holdings. The order, which came on Wednesday, comes as part of the FSA’s broader crackdown on crypto-related activities, citing concerns about financial stability and consumer protection.
Violations and regulatory concerns
The FSA accuses Saxo Bank of violating several rules and regulations related to its crypto trading and custody services, which were launched in 2018. Specifically, the regulator claims that the bank failed to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, lacked adequate risk management and governance processes, and provided misleading information to customers regarding the nature and risks of crypto assets. The FSA emphasizes that crypto assets are currently unregulated and unsupervised.
The order stated:
“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. However, this does not change the fact that the activity, in itself, is not permitted for Danish financial institutions in accordance with § 7, subsection 1, in the Financial Business Act.”
Saxo Bank, in response, expressed disappointment and disagreement with the FSA’s order. The bank asserts that it has always operated in compliance with applicable laws and regulations, implementing robust security and transparency measures. Saxo Bank also highlights its ongoing dialogue with the FSA since 2018, stating that it has not previously received any formal warnings or sanctions.
Implications and controversy
Saxo Bank has been offering crypto trading services to its clients through its SaxoTraderGO platform, enabling the trading of various cryptocurrencies against fiat currencies and other asset classes. The bank claims to have a significant number of clients globally and has witnessed substantial growth in its crypto trading volume. However, the FSA holds a different view, deeming crypto assets high-risk and susceptible to fraud, theft, hacking, and money laundering.
The regulator asserts that Saxo Bank’s crypto exposure poses risks to its liquidity, solvency, reputation, and trust of clients and regulators. Saxo Bank intends to appeal the FSA’s decision, seeking to protect its clients’ interests.
The FSA’s action against Saxo Bank underscores the Danish regulatory authorities’ increasing scrutiny of cryptocurrencies. The financial watchdog said that Saxo’s current crypto activity remains unregulated at the moment, as the European Union’s crypto regulation (MiCA) will only be in effect from 30 December 2024.
On May 16, the European Union unanimously passed MiCA, a crypto legislation aimed at establishing a regulatory framework for crypto assets. The legislation focuses on safeguarding the financial stability of Europe and protecting consumers.
