Denmark: Laws Related to Token Sales, Blockchain, and Digital Proof

For EU regulations, please visit EU Laws Related to Token Sales, Blockchain, and Digital Proof.

In December 2013, Denmark’s FSA released a statement echoing the European Banking Authority’s warning about virtual currencies.

In March 2014, the Danish Central Bank issued a statement that bitcoin is not a currency, as it “does not have any real trading value compared to gold and silver, and thus is more similar to glass beads.” It also pointed out that virtual currencies are not protected by any national laws or guarantees.

In April 2014, the Danish Tax Authority (SKAT) released a binding statement declaring that an invoice cannot be issued in bitcoin, but must instead be issued in Danish Kroner or another recognized currency. It also stated that any losses in bitcoin cannot be deducted as a cost of doing business. Since cryptocurrecny transactions are seen as private in Denmark, they are not taxed and the gains are also tax exempt. Hanne Sogaard Hansen, the chairman of SKAT, said, “We see the outcome of bitcoin transactions as a result of something purely private. Therefore, any gains on bitcoin are tax-exempt, and losses are not deductible.” Businesses whose primary focus is in digital currencies, however, must declare their winnings and losses to the government.

In 2017, the FSA issued a statement declaring that cryptocurrencies that are only usable as a means of payment remain unregulated in the country’s financial legislation. However, certain tokens increasingly resemble financial instruments, which could potentially cause them to fall within the scope of regulation in the future. It notes that this will be determined on a case by case basis. The FSA notes that even though an offered token is not a financial instrument, the way an ICO is structured, or the way investments in ICOs take place, can still be regulated. The FSA advises businesses involved with ICOs and cryptocurrencies to carefully consider Danish financial regulations and EU financial regulations, specifically the Prospectus Directive, the Alternative Investment Fund Managers Directive, the Fourth Anti-Money Laundering Directive, and others. It notes, “whether an ICO is regulated or not will always be subject to an individual assessment by the Danish FSA.” It goes on to warn that investing in ICOs is a “high-risk investment” and that “the Danish FSA strongly advise that you as a consumer and investor make yourself aware of all the risks.”

In March 2018 Danske Bank, Denmark’s biggest bank, decided to ban trades in cryptocurrencies on its trading platforms. In addition, the bank is also phasing out the options currently available to investors that allow them to buy financial instruments through cryptocurrencies.

In April 2018, the European Commission announced that 22 European countries signed a Declaration on the Establishment of a European Blockchain Partnership, which “enables member States to work together with the European Commission to turn the enormous potential of blockchain technology into better services for citizens.” Denmark signed on a few months later. After signing the declaration, Brian Mikkelsen, the Danish Minister for Industry, Business and Financial Affairs remarked that Denmark will be “the first country in the world [to] use blockchain technology to register ships in the Danish ship registers.”

Overall, Denmark is considered friendly to cryptocurrencies and blockchain, with the Danish Central Bank even thinking about using blockchain to create “E-Krone,” a digital currency. While cryptocurrencies are not permitted in online casinos regulated in Denmark, some Danish political parties even accept bitcoin campaign contributions.

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