Contrary to recent social media reports, the Danish Financial Supervisory Authority (DFSA) has clarified that it has not proposed banning self-custodial cryptocurrency wallets. The DFSA’s director for fintech, payments services, and governance, Tobias Thygesen, emphasized that reports suggesting otherwise are incorrect.
“We are aware of some misinformation circulating on social media suggesting that the DFSA intends to ban hardware wallets and other non-custodial wallets,”said Thygesen. “This is incorrect. The DFSA has not proposed any such ban.”
Self-Custodial Wallets Exempt from MiCA Regulation
The clarification followed the DFSA’s regulatory assessment of decentralization in the context of the Markets in Crypto-Assets (MiCA) Regulation, which came into full force on June 30. According to Thygesen, MiCA explicitly exempts crypto asset services provided in a fully decentralized manner without any intermediary. For a service to be regulated under MiCA, it must involve one of the activities listed in Article 3(16) of MiCA, such as crypto custody, trading, and other services.
“Hardware wallets do not give custody of private keys to the wallet provider and thus are not regulated by MiCA. Non-custodial wallets, by their nature, are not subject to MiCAR,”explained Thygesen.
Understanding Self-Custodial Wallets
Self-custody refers to storing cryptocurrencies without any intermediary, giving users full control over their assets. This method allows users to act as their own bank but also means they bear the responsibility for maintaining wallet security and the safety of private keys. Unlike custodial wallets, self-custodial wallets do not typically require Know Your Customer (KYC) procedures.
Source: Mikko Ohtamaa
Self-custodial wallets include software-based options like MetaMask and hardware wallets such as Ledger and Trezor. These wallets provide users with direct control over their assets without involving third-party custody.
Regulatory Awareness and Compliance
Despite not being subject to MiCA, some software wallets that integrate with fully decentralized services may still face regulatory scrutiny. Thygesen noted that cases, where software wallets execute orders on decentralized exchanges on behalf of clients, could potentially be regulated under MiCA if a legal entity controls the service.
“These cases are often very complex and would entail a case-by-case assessment,” said Thygesen.
“The intention is to ensure awareness of potential regulatory requirements and underline that the DFSA is open for dialogue to understand whether specific offers in Denmark are in scope of MiCA or not.”
In summary, the DFSA aims to clarify regulatory requirements and address misinformation, ensuring that the use of self-custodial wallets remains compliant with existing regulations.
