In a letter to its customers, Danske Bank was clear of about its negative position towards cryptocurrencies, urging customers to refrain from investing in the field. The arguments provided also explain why the bank does not allow cryptocurrency trading on its platforms.
The widespread attention gained by Bitcoin and other digital currencies among consumers and investors in many countries has prompted the debate regarding their value as investment assets. The Copenhagen-based bank published the statement to express the institution’s view on the matter.
The bank strongly recommends customers to avoid investing in cryptocurrencies because “cryptocurrencies differ from traditional currencies in the sense that they are not backed by a central bank. They lack the investor and consumer protection typically connected with traditional currencies and investments.”
Moreover, Danske Bank argues that, because of its high volatility and non-transparent price formation, a cryptocurrency investor has a very limited insight into how the market is developing and what is driving the price.
The statement goes on to add that “the lack of transparency and regulatory control have made cryptocurrencies a target for criminal purposes and we know that they on several occasions have been involved in criminal transactions like money laundering or extortion.” As a financial institution, the bank has an obligation to assist in the fight against financial crime and money laundering.
Danske Bank is open to reconsidering its position once the cryptocurrency market becomes more transparent and mature.
Also, due to the above-mentioned reasons, the bank does not in any way want to support the investment environment surrounding cryptocurrencies: “That is why we have decided to also phase out the possibility to buy financial instruments directly related to the price of cryptocurrencies. For instance, that could be derivatives or ETNs (Exchange Traded Notes) that mirror the price of a cryptocurrency. These types of securities are characterized by high volatility and risk.”
The bank also explained their policy on credit card transactions and deposits related to cryptocurrencies: “If you as a customer wish to deposit funds originating from cryptocurrency investments, we will treat it in the same way as deposit funds stemming from other types of investments. Accordingly, we may accept the deposit, if it complies with current regulation and anti-money laundering procedures.”
While not blocking the usage of Danske Bank issued credit cards in connection with trading cryptocurrencies, the bank will always put current anti-money laundering procedures and regulation first and expect customers to comply.