The biggest bank in Denmark, Danske Bank, has released a report criticising cryptocurrencies over perceived risks and lack of transparency.
In the document released on Sunday, the bank provided three primary reasons why it is overall “negative” towards cryptocurrencies, despite the growing attention they have received from among consumers and investors.
Since cryptocurrencies do not come with central bank backing, the report states, they lack protections for consumers and investors. Further, high volatility and a lack of pricing transparency provide “very limited insight” into market development and factors affecting prices. And, finally, a lack of regulatory oversight means cryptocurrencies are a target for criminals, it says.
Therefore, according to the bank, “we strongly recommend that our customers avoid investing in cryptocurrencies.”
The report continues:
“For these reasons, it is not possible to trade cryptocurrencies on our trading platforms. However, we monitor the market closely, and if the cryptocurrency market becomes more transparent and mature, we might reconsider this position.”
Danske Bank says it is also phasing out the option of buying financial instruments, such as derivatives or exchange traded notes (ETNs), that are linked to the price of cryptocurrencies. However, general customers will still be allowed to use their credit cards to purchase cryptocurrencies.
While against cryptos for the meanwhile, Danske Bank has been somewhat more keen on blockchain technology.
Thirdly, and most importantly, the lack of transparency and regulatory control have made cryptocurrencies a target for criminal purposes and we know that they on several occasions have been involved in criminal transactions like money laundering or extortion.
An early member of blockchain consortium R3, in 2016, the bank took part in trials with other members for a syndicated loan exchange based on the technology. Another trial that year saw it work with R3 and members on a distributed ledger trial focused on applications in trade finance.
And in March 2017, it joined other banks and financial firms in completing the second phase of another blockchain proof-of-concept, also focused on syndicated loans.