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Danske Bank maintains cautious position on Bitcoin and other cryptos

CryptocurrencyJun 18, 2021 06:02AM ET
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© Reuters.

By Samuel Indyk – Danske Bank (CSE:DANSKE) has reiterated its cautious position on cryptocurrencies in a statement published on its website, maintaining its ban on trading crypto on its own trading platforms.

Denmark’s largest bank noted increasing interest in cryptocurrencies, such as Bitcoin and Ethereum, and said they regularly receive questions from customers, journalists, and other stakeholders regarding their position.

A cautious approach

The bank highlighted four main reasons for maintaining a cautious approach on cryptocurrencies.

  • Trade in cryptocurrencies is not always sufficiently transparent, which may make it difficult for us as a financial institution to meet our obligations to fight financial crime and money laundering.
  • Trade in cryptocurrencies is only partially regulated by financial regulation and consumers therefore do not always have the consumer protection associated with regulated financial products.
  • Pricing of cryptocurrencies is opaque and highly fluctuating, and as an investor, you have limited insight into how the market develops and what drives the price.
  • Transactions with certain cryptocurrencies require very large amounts of computing power that are extremely energy intensive, and this is in not in line with Danske Bank's ambition to promote sustainable development together with our customers.

The final reason is one that has garnered plenty of attention in recent weeks after Tesla (NASDAQ:TSLA) CEO Elon Musk announced his vehicle company would stop accepting Bitcoin as payment for its vehicles due to the environmental impact of mining and transactions.

Money laundering

The fact that Danske Bank acknowledged that cryptocurrencies may make it difficult to meet obligations related to money laundering may be seen as ironic to some. The company is still being investigated in the EU and US over their part in a multi-billion dollar money laundering operation.

Separately, in April this year, their CEO, Chris Vogelzang, was forced to resign after being named a suspect in a separate case at Dutch bank ABN Amro.

However, this may be part of the reason why the bank is being overly cautious, given the increasing use of cryptocurrencies to facilitate financial crime. This has been highlighted recently by the ransomware attacks on US infrastructure - such as the Colonial pipeline and JBS meat plants - that saw hackers paid multimillion dollars worth of Bitcoin to allow operations return to normal.

Blockchain position

Despite the caution, Danske Bank has not completely turned their back on the technology that underpins cryptocurrencies.

“Cryptocurrencies represent a significant digital innovation in financial services and we recognise that there is a significant global market for cryptocurrencies and that many customers find cryptocurrencies interesting,” the bank said.

“At the same time, we see great potentials in the blockchain technology, which cryptocurrencies build upon.”

For now though, Danske Bank is happy to take a back seat but that may change in the future if regulation improves.

“We continuously monitor developments in the area of cryptocurrencies, and as the cryptocurrency market matures and is further regulated, we will review our position,” the bank said.

Danske Bank maintains cautious position on Bitcoin and other cryptos

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