Contrary to recent social media reports, Denmark is not on the verge of banning Bitcoin wallets. The Danish Financial Supervisory Authority (DFSA) has clarified that it has no plans to prohibit self-custodial cryptocurrency wallets.
The DFSA has addressed and refuted the misinformation circulating on social media, which falsely suggested that the authority intended to ban hardware and other non-custodial wallets. Tobias Thygesen, the DFSA’s director for fintech, payment services, and governance, confirmed to Cointelegraph that:
“Self-custodial wallets are inherently not subject to MiCA regulations.”
This clarification comes in the wake of the DFSA’s regulatory assessment concerning decentralization under the Markets in Crypto-Assets (MiCA) Regulation, which took effect on June 30. On June 25, the DFSA released an assessment that outlined principles for addressing the regulatory challenges posed by decentralized crypto asset services.
Thygesen pointed out that MiCA explicitly excludes crypto asset services that are “provided in a fully decentralized manner without any intermediary.” Therefore, for a service to fall under MiCA regulation, it must not be fully decentralized and must involve activities listed in Article 3(16) of MiCA, such as crypto custody, trading, and other services.
“The only regulated activity directly concerning wallets is the custody and administration of crypto-assets on behalf of clients,” Thygesen told Cointelegraph, noting that this involves managing crypto-assets for clients.
Mikko Ohtamaa, co-founder of the algorithmic investment protocol Trading Strategy, misinterpreted this assessment in a social media post on June 26. He mistakenly believed that by exempting self-custodial wallets, the DFSA was effectively moving to ban them in Denmark, which is not true.
Source: Mikko Ohtamaa
### What Are Self-Custodial Wallets?
Self-custody refers to a method of storing cryptocurrencies like Bitcoin (BTC) without relying on intermediaries. Users have direct control over their crypto assets and are responsible for the security and safety of their private keys.
Unlike custodial crypto wallets, such as those integrated with Telegram messenger, self-custodial wallets generally do not require Know Your Customer (KYC) procedures. The private key is the sole means of verifying ownership in these cases.
Self-custodial wallets come in various forms, including software-based wallets like MetaMask and hardware wallets like Ledger or Trezor.
### DFSA’s Regulatory Awareness
The DFSA’s assessment aims to enhance awareness of potential regulatory requirements. While self-custodial wallets are not subject to MiCA, some software wallets that provide integrated interfaces to fully decentralized services might be independently regulated by MiCA if they do not operate in a fully decentralized manner.
For instance, a software wallet that executes orders on a decentralized exchange on behalf of clients might need authorization if a legal entity controls the offer and provides this service to clients, Thygesen explained.
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