Saxo Bank ordered to sell its cryptocurrency holdings by Denmark’s financial watchdog.

Danish bank Saxo has been ordered by Denmark’s financial regulator to divest its own crypto holdings, the authority announced on Wednesday.

The Danish Financial Supervisory Authority (FSA) explained that it is not legal for banks to engage in such activities 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 been conducted in order to hedge risks associated with the offering of other financial products,” the statement said. “However, this does not change the fact that the activity itself is not permitted for Danish financial institutions…”

The financial watchdog also stated that since the European Union’s cryptocurrency regulation, known as the Markets in Crypto-Assets Regulation (MiCA), will only come into effect on December 30, 2024, the activity is currently unregulated.

“Unregulated trading in crypto assets can create distrust in the financial system, and the Danish FSA believes that it would be unfounded to legitimize trading in crypto assets,” the statement said.

Read more: EU’s Landmark Crypto Law MiCA Published in Official Journal

“Naturally, we take the decision of the Financial Supervisory Authority into consideration and will thoroughly review it to determine our response. Regarding this matter, we have held a very small portfolio of cryptocurrencies solely to hedge a very small proportion of the risk associated with facilitating crypto assets,” Saxo Bank said in a statement.

“The majority of this exposure is mitigated through exchange-traded and cleared products. Therefore, the FSA’s decision will have a minimal 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.

Edited by Parikshit Mishra.