- Denmark is reportedly planning to regulate self-managed wallets and other ‘DeFi interfaces’.
- Denmark’s plans do not reflect MiCA guidelines and the US treatment of self-custody BTC wallets.
Self-custody wallets, which are common among Bitcoin [BTC], could face regulation in Denmark. In response to recent DeFi guidance from the Danish FSA (Financial Supervisory Authority), Mikko Ohtamaa of Trading Protocol noted,
“In the latest DeFi guidelines from the Danish FSA, the regulator goes too far: the guideline 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 don’t have to think about it too much to realize 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) regulations, which were set to go live on December 30, 2024. The MiCA regulations do not apply to decentralized finance.
Ohtamaa lambasted DFSA, noting that if so proposal were adopted, offering BTC wallets in Denmark could be a challenge.
“What this means is that no one can offer Bitcoin wallets, DEX interfaces or anything else Danish-related anymore, because these would have to be regulated in Denmark.”
While Estonia has reportedly followed a similar route in self-custody wallets, the US recently rejected the same.
In March, there were claims against Coinbase Wallet dropped in the SEC vs. Coinbase lawsuit, cementing victory for self-custody wallets in the US.
‘Significant setback for SEC as Judge Failla grants 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 peer-to-peer to develop peer software. Did not work’
Furthermore, the recently passed US crypto infrastructure bill, FIT21 Act, chosen 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 stands could negatively impact those offering self-managed Bitcoin wallet services in Denmark, via apps or web browsers, according to Ohtamaa.