Denmark’s financial regulators have clarified recent social media claims suggesting an impending ban on Bitcoin wallets, asserting that they have no intention to prohibit self-custodial cryptocurrency wallets.
The Danish Financial Supervisory Authority (DFSA) debunked rumors alleging plans to outlaw self-custodial wallets, also known as non-custodial wallets.
“We’ve noticed misinformation circulating on social media about our alleged plans to ban hardware and other non-custodial wallets,” explained Tobias Thygesen, DFSA’s director for fintech, payments services, and governance, in a statement to Cointelegraph.
Thygesen clarified that self-custodial wallets are not automatically subject to the Markets in Crypto-Assets (MiCA) Regulation, which took effect on June 30. The DFSA’s analysis, published on June 25, outlined guiding principles for managing decentralized crypto-asset services.
MiCA explicitly exempts crypto-asset services that operate fully decentralized without intermediaries. Therefore, services must exhibit a degree of centralization and engage in activities specified under Article 3(16) of MiCA, such as crypto custody or trading, to fall under regulatory oversight.
“The only regulated aspect concerning wallets pertains to custody and administration of crypto-assets for clients,” Thygesen added. He addressed a misunderstanding by Mikko Ohtamaa, co-founder of Trading Strategy, who misconstrued the assessment to suggest Denmark aimed to cease offering such wallets, which Thygesen clarified was not the case.
Self-custodial wallets allow users to store cryptocurrencies like Bitcoin directly, without intermediaries, enabling full control over their crypto assets. However, users must manage the security of their wallets and safeguard their private keys themselves.
Unlike custodial wallets that often require Know Your Customer (KYC) procedures, self-custodial wallets authenticate ownership solely through private keys.
These wallets include software-based solutions like MetaMask and hardware devices such as Ledger or Trezor. The DFSA’s evaluation aimed to promote awareness of potential regulatory responsibilities despite exempting self-custodial wallets from MiCA oversight.
While not directly regulated by MiCA, certain software wallets may integrate interfaces with fully decentralized services alongside wallet functions. Thygesen noted that such integrations could potentially fall under MiCA regulation if they lack full decentralization.
For instance, a software wallet facilitating direct transactions on a decentralized exchange might require authorization if a legal entity controls the service on behalf of clients.
The DFSA’s clarification underscores Denmark’s approach to navigating the evolving landscape of crypto-assets, emphasizing clarity in regulatory expectations amid technological advancements and market developments.