Saxo Bank, one of Europe’s leading online brokers, has been instructed by the Danish Financial Supervisory Authority (FSA) to divest its cryptocurrency holdings. The FSA’s decision, made on Wednesday, is part of a wider effort to crack down on crypto-related activities due to concerns about financial stability and consumer protection.
The FSA has accused Saxo Bank of violating various rules and regulations regarding its crypto trading and custody services, which were launched in 2018. Specifically, the regulator alleges that the bank failed to adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, lacked sufficient risk management and governance processes, and provided customers with misleading information about the nature and risks associated with crypto assets. The FSA emphasizes that crypto assets are currently unregulated and unsupervised.
According to the order issued by the FSA, Saxo Bank’s trading of crypto assets for its own benefit was conducted to mitigate risks associated with offering other financial products. Nevertheless, the FSA maintains that this activity is prohibited for Danish financial institutions under the Financial Business Act.
Saxo Bank has expressed its disappointment and disagreement with the FSA’s order, asserting that it has always operated in compliance with applicable laws and regulations while implementing robust security and transparency measures. The bank also highlights its ongoing communication with the FSA since 2018 and notes that it has not previously received any formal warnings or sanctions.
This development has significant implications and has stirred controversy. Saxo Bank has been offering crypto trading services through its SaxoTraderGO platform, enabling clients to trade various cryptocurrencies against fiat currencies and other asset classes. The bank claims to have a substantial number of clients worldwide and has experienced substantial growth in its crypto trading volume. However, the FSA holds a different perspective, considering crypto assets to be high-risk and susceptible to fraud, theft, hacking, and money laundering.
The regulator argues that Saxo Bank’s crypto exposure poses risks to its liquidity, solvency, reputation, and the trust of both clients and regulators. Saxo Bank intends to appeal the FSA’s decision to protect its clients’ interests.
This action taken by the FSA against Saxo Bank highlights the increasing scrutiny of cryptocurrencies by Danish regulatory authorities. The financial watchdog emphasizes that Saxo’s current crypto activities remain unregulated until the European Union’s crypto regulation (MiCA) is implemented on December 30, 2024.
On May 16, the European Union passed MiCA, a crypto legislation aimed at establishing a regulatory framework for crypto assets. The legislation is focused on safeguarding the financial stability of Europe and protecting consumers.