- Denmark reportedly planning to regulate self-custody wallets and other ‘DeFi interfaces’.
- Denmark’s plans don’t mirror MiCA’s guidelines and US treatment of BTC self-custody wallets.
Self-custodial wallets, which are common with Bitcoin [BTC], could face regulation in Denmark. Reacting to recent DeFi guidance by the Danish FSA (Financial Supervisory Authority), Mikko Ohtamaa of Trading Protocol noted,
‘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.’
Ohtamaa added that the interface thesis could affect everything, including Bitcoin wallet service providers.
‘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.’
Will Denmark’s plans affect Bitcoin?
DFSA’s possible move was based on the ‘perceived gap’ in the EU’s MiCA (Markets in Crypto Assets) regulation, which would go live on 30th December, 2024. The MiCA regulations don’t apply to decentralized finance.
Ohtamaa slammed DFSA and noted that if its proposal were adopted, offering BTC wallets in Denmark could be challenging.
‘What this means is that no one can offer Bitcoin wallets, DEX interfaces, or anything that touches a token to Danish anymore because they would need to be regulated in Denmark.’
Although Estonia reportedly took a similar route on self-custodial wallets, the same was recently rejected in the US.
In March, claims against Coinbase Wallet were dropped in the SEC vs. Coinbase lawsuit, reinforcing a win for self-custody wallets in the US.
‘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’
Additionally, the recently passed US crypto infrastructure bill, FIT21 Act, opted to study DeFi, like MiCA, instead of regulating it.
That said, DFSA is currently calling for feedback from private actors. However, it remains to be seen how DFSA will improve and adopt the proposals on DeFi.
Adopting the DFSA proposal, as it is, per Ohtamaa, could negatively affect those offering self-custody Bitcoin wallet services in Denmark, whether through apps or web browsers.
