- Denmark considers regulating self-custody Bitcoin wallets, potentially impacting secure cryptocurrency storage and transactions.
- Danish FSA’s proposal extends regulation to all digital interfaces used in crypto, including web browsers and apps.
Denmark is considering new regulatory measures that could affect the use of Bitcoin and other cryptocurrencies within its borders. Specifically, the Danish Financial Supervisory Authority (FSA) has proposed regulations that may impact self-custody wallets, which are a popular method for storing Bitcoin securely.
DENMARK TO ABOUT TO BAN BITCOIN WALLETS
We have finally reached this point.
In the latest DeFi guidance of Danish FSA, the regulator goes too far: The guidance tries to capture everything in crypto regulation, including your Bitcoin wallet, using "interface" argument. DFSA says… pic.twitter.com/F7jFuLhNqC
— Mikko Ohtamaa (@moo9000) June 26, 2024
The Danish FSA’s recent guidance targets decentralized finance (DeFi) interfaces, including Bitcoin wallets. Mikko Ohtamaa, a figure from the Trading Protocol, criticized the FSA’s approach, suggesting that it broadly categorizes many digital interfaces as regulatable entities.
‘In the latest DeFi guidance of Danish FSA, the regulator goes too far: The guidance tries to capture everything in crypto regulation, including your Bitcoin wallet, using the “interface” argument.’
According to Ohtamaa, the FSA’s definition could extend regulation to virtually any interface used in crypto transactions, such as computers, web browsers, and specific crypto-related websites like Uniswap.
‘You do not need to think about it too hard to realise that everything is an interface: your computer, your web browser, your Bitcoin wallet, Uniswap website, and so on.’
This decision by Denmark appears not to align with the European Union’s upcoming Markets in Crypto Assets (MiCA) regulation, set to be implemented by the end of 2024, which does not currently regulate DeFi.
Ohtamaa argues that the FSA’s proposal is an overreach that could hinder the ability to offer Bitcoin wallet services in Denmark, as any service involving digital tokens would require regulation under the new guidelines.
The context of these proposed changes in Denmark contrasts with recent developments in other regions, such as the United States. For example, a recent court decision favored the Coinbase Wallet, reinforcing the stance that self-custody wallets should not be classified as brokers.
‘Significant setback for SEC w/ Judge Failla granting Coinbase’s motion to dismiss SEC’s claim that Coinbase acted as a broker by offering non-custodial digital wallet software.SEC aimed to discourage builders from developing peer-to-peer software. Didn’t work’
This ruling was seen as a victory for digital asset holders, promoting the development of peer-to-peer software without stringent regulations.
Moreover, the U.S. has taken a more measured approach with the FIT21 Act, choosing to study DeFi rather than imposing immediate regulations. This approach mirrors the EU’s stance under MiCA, suggesting a trend towards cautious evaluation rather than direct regulation.
In Estonia, a similar regulatory effort regarding self-custody wallets was proposed but did not proceed, indicating a possible resistance to strict regulation in this area across various jurisdictions.
The Danish FSA is currently seeking Feedback from private entities on its Proposed DeFi Guidelines
The outcome of this consultation could influence how the regulations are finalized and implemented. The potential for stringent regulations could pose challenges for those providing Bitcoin wallet services in Denmark, affecting both service providers and users who rely on these tools for cryptocurrency transactions.
The situation in Denmark serves as a critical example of how national regulatory approaches to cryptocurrency can vary and highlights the ongoing global debate over the best way to manage and integrate these emerging technologies into existing financial systems.
