Shalini Nagarajan

In Denmark, the financial regulator has instructed Saxo Bank to scrap its crypto holdings due to their unregulated status in the country.



The Danish Financial Supervisory Authority (FSA) said that the investment bank traded a crypto portfolio as a hedge for its own digital asset products.



However, such activity violates the regulations outlined in the Financial Business Act, which prohibit Danish financial institutions from engaging in such practices, FSA said in a statement.



“Saxo Bank&#8217;s trading in crypto assets for its own account is found to be outside the legal business area of financial institutions,” the regulator <a href="https://www.finanstilsynet.dk/Tilsyn/Tilsynsreaktioner/Paabud/2023/Saxo_bank_050723" target="_blank" rel="noreferrer noopener">said</a>. “On this basis, Saxo Bank is ordered to dispose of its own holdings of crypto assets.”



Founded in 1992, Copenhagen-based Saxo Bank has grown to manage assets worth <a href="https://www.home.saxo/institutional-and-partners/about" target="_blank" rel="noreferrer noopener">95 billion </a>euros ($103 billion) and offers online trading services in various markets, including forex, stocks, CFDs and futures.



The bank expanded into the realm of crypto trading at a later stage. In 2021, it <a href="https://www.home.saxo/en-sg/content/commentaries/pressrelease/saxo-markets-launches-crypto-fx-trading-for-bitcoin-ethereum-and-litecoin-21052021" target="_blank" rel="noreferrer noopener">ventured into crypto derivatives trading</a> against major currencies, marking a notable expansion of its services in the crypto space. Co-founder Lars Seier Christensen has also <a href="https://www.crowdfundinsider.com/2022/09/196480-saxo-bank-founder-invests-e10m-in-concordium-blockchain/" target="_blank" rel="noreferrer noopener">dabbled</a> in blockchain venture capital.



<h2 class="wp-block-heading">Saxo Bank, like Denmark, now waits for EU crypto rules</h2>



Denmark’s regulator mentioned that crypto trading is currently unregulated in the region because <a href="https://blockworks.co/news/european-parliament-mica-doesnt-touch" target="_blank" rel="noreferrer noopener">European Union regulations governing crypto markets</a> (MiCA) won’t come into effect until Dec. 30, 2024.



A spokesperson from Saxo Bank downplayed the impact of the FSA&#8217;s decision on its operations, saying it would have a “very limited impact” on its business and that customers would not experience significant changes.&nbsp;



“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,” the spokesperson told Blockworks.



&nbsp;“The vast majority of this exposure is mitigated through exchange-traded and cleared products,” they said.



The spokesperson added that Saxo Bank customers with exposure to digital assets don’t actually buy the underlying crypto, but rather a “financial product that follows the price of the cryptocurrency.”



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European Union

Denmark orders Saxo Bank to get rid of its crypto — for now

Jocelyn Yang

<div id="highlights-block_62b98c3f4fa1a" class="highlights">
 <ul>
 <li>Celsius was one of the major players to shake the crypto world after it paused withdrawals, swaps and transfers between accounts</li>
 <li>The market contagion led more exchanges and banks to carry out emergency assessments based on the firms’ liquidity status</li>
 </ul>
 
</div>



Multiple cryptocurrency exchanges and lending platforms have announced halts on withdrawals in the past two weeks as markets across the world have grappled with bear territory.&nbsp;



Here’s a timeline outlining the exchanges and lending platforms that have faced liquidity pressure.&nbsp;



<h3 class="wp-block-heading">Week of June 13&nbsp;</h3>



Crypto lending platform <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">Celsius</a> was one of the major players that first shook the crypto world when it announced it would pause withdrawals, swaps and transfers between accounts on its platform due to “extreme market conditions” ahead of the Monday market open on June 13.&nbsp;



Market contagion set in; the next morning, <a href="https://twitter.com/binance/status/1536398693523501056?s=20&amp;t=52LiWVMEesEcbAb6O3vmoQ" target="_blank" rel="noreferrer noopener">Binance</a> paused bitcoin withdrawals for about three hours as the crypto exchange dealt with the impact of Celsius&#8217; move. Some crypto banks have also worked to publicly distance themselves from Celsius due to the crisis.&nbsp;



On Wednesday, more market volatility came after it was reported digital assets-focused hedge fund firm <a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">Three Arrows Capital (3AC) is facing potential insolvency</a> after a $400 million liquidation. The firm had already taken a major hit with Terra USD stablecoin’s <a href="https://cms.blockworks.co/?s=terra" target="_blank" rel="noreferrer noopener">collapse in May</a>, due to its substantial investment in LUNA.&nbsp;



On Thursday, <a href="https://cms.blockworks.co/finblox-imposes-withdrawal-limit-amid-3acs-uncertainty/" target="_blank" rel="noreferrer noopener">Finblox</a>, a Hong-Kong based crypto staking and yield generation platform which secured investment from 3AC, said it will impose a $1,500 monthly withdrawal limit and pause reward distribution amid 3AC’s uncertainty.&nbsp;



“This set of actions is a necessary move in such a highly volatile market and we believe should help us and our community to manage the effect,” Finblox said in a statement.&nbsp;



Crypto lender <a href="https://babel.finance/article-views.html?id=50" target="_blank" rel="noreferrer noopener">Babel Finance</a> suspended withdrawals and redemptions on Friday, citing “unusual liquidity pressures.” The platform gave an <a href="https://cms.blockworks.co/babel-finance-working-to-ease-unusual-liquidity-pressures/" target="_blank" rel="noreferrer noopener">update</a> the following Monday that it has “reached preliminary agreements on the repayment period of some debts” to ease its liquidity pressure in the short term.



<h3 class="wp-block-heading">Week of June 20</h3>



On the eve of Monday market opening, Hong Kong-based crypto exchange Hoo said in a <a href="https://help.hoorhi.shop/hc/en-us/articles/7639261299353" target="_blank" rel="noreferrer noopener">blog post</a> it would be delaying withdrawals for 24 to 72 hours, citing “market volatility and liquidations by large institutions in the crypto industry,” raising panic among its users as many looked to request withdrawals. The exchange <a href="https://help.hoorhi.shop/hc/en-us/articles/7749830351129-Announcement-on-Openning-Withdrawal-Currency-of-Hoo" target="_blank" rel="noreferrer noopener">reopened withdrawal</a> for some tokens starting Wednesday.&nbsp;



In its latest announcement, posted on Friday, Hoo <a href="https://help.hoorhi.shop/hc/en-us/articles/7826670082073-Supplementary-notice-on-the-token-withdrawals-of-Hoo" target="_blank" rel="noreferrer noopener">said</a> some of its partners and institutions have faced liquidity issues, which resulted in &#8220;the unusual phenomenon of Hoo’s custodian fund return channels in these institutions.”&nbsp;



“At present, Hoo is actively communicating and solving problems with relevant institutions and third parties,” the statement read.&nbsp;



Meanwhile, crypto broker <a href="https://cms.blockworks.co/three-arrows-capital-brink-default-owes-voyager-657m/" target="_blank" rel="noreferrer noopener">Voyager Digital</a> revealed Wednesday it had exposure to 3AC — the company sought to recover about $657 million allegedly loaned to the hedge fund.



Australia-based crypto lender <a href="https://cms.blockworks.co/crypto-lender-maple-finance-latest-to-warn-of-insufficient-cash-amid-market-turmoil/" target="_blank" rel="noreferrer noopener">Maple Finance</a> also faced liquidity pressures and said Tuesday its lenders must wait for borrower repayments. “There may be instances where there is insufficient cash in pools,” the company <a href="https://maple.finance/news/managing-liquidity/" target="_blank" rel="noreferrer noopener">said</a>.&nbsp;



Crypto exchange <a href="https://cms.blockworks.co/coinflex-halts-withdrawals-citing-uncertainty-around-unnamed-counterparty/" target="_blank" rel="noreferrer noopener">CoinFLEX</a> was one of the most recent firms to announce a pause in withdrawals, the company said Thursday. Customers can continue to trade and deposit, but no funds can be taken off the platform, according to a statement.



<h3 class="wp-block-heading">What&#8217;s in store for the week of June 27?</h3>



There remains a great deal of uncertainty heading into the final week of June, and market participants are proceeding with trepidation, mindful of potential shoes yet to drop.



On Monday, Voyager issued a notice of default to 3AC after the latter failed to make any required payments.



&#8220;Voyager intends to pursue recovery from 3AC and is in discussions with the Company&#8217;s advisors as to legal remedies available,&#8221; the company wrote in a press release, declining Blockworks&#8217; request for further comment.



The company has engaged Moelis &amp; Company as financial advisors, and it has accessed the first $75 million of its <a href="https://cms.blockworks.co/voyager-to-borrow-500m-from-alameda-amid-insolvency-rumors/" target="_blank" rel="noreferrer noopener">line of credit with Alameda Research</a>, according to the statement.



“When one of the largest crypto hedge funds can be underwater due to leverage, participants in the market must be aware of the total leverage in the market and how it is affected during times when this credit suddenly vanishes,” Mads Eberhardt, cryptocurrency analyst at Saxo Bank, <a href="https://www.home.saxo/content/articles/cryptocurrencies/crypto-weekly-20062022" target="_blank" rel="noreferrer noopener">wrote in a blog post</a>.



“[That] has the power to take many crypto lenders to their knees, effectively fueling the contagion further,” he noted.



This story was updated on June 27, 2022, at 8:15 am ET.



Correction, June 28, 2022, at 10:30 am ET: Mads Eberhardt&#8217;s comments came from the Saxo Bank blog.



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