As Cryptocurrencies take a plunge in the market and Bitcoin goes below the $7,500 mark, Denmark’s biggest bank; Danske Bank based in Copenhagen has issued a warning against investing in cryptocurrencies.
One of the reasons given is, like any other fiat currency or real money, its either backed by the government or by the Gold standard. However, cryptocurrencies are not backed anyone or investor and consumer protection are limited to the same liabilities as fiat currencies.
The mere fact that the increase or decrease in price is determined by the hype in the market and its high volatility is the bank’s second reason. Therefore price fluctuation cannot be determined or controlled.
The obvious and most important reason is lack of transparency and regulatory control as the major reasons for their stand and the institution believes it is its obligation to assist in the fight against money laundering and other financial crimes.
Cryptocurrencies at present do not provide a sufficient level of transparency for the bank to meet anti-money laundering (AML) obligations, the notice stated.
An excerpt read:
For these reasons, it is not possible to trade cryptocurrencies on the bank’s trading platforms. However, the bank does monitor the market closely, and if the cryptocurrency market becomes more transparent and mature, the bank might reconsider this position.
“We do not in any way want to support the investment environment surrounding cryptocurrencies,” the notice added. It has phased out the possibility of purchasing financial instruments directly related to the prices of cryptocurrencies.
Such instruments can include exchange trade notes that mirror the price of cryptocurrency, the bank noted. Such securities, it claimed, are characterized by high risk and volatility.
In compensation, the bank is providing an alternative stating that if it has to accept funds originating from cryptocurrency investments, it would treat it like every other investment transactions; meaning it must comply with the existing AML anti-procedures and regulations.
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