The 24-year-old travelled to Brighton for a medical last night but Club Brugge have just said negotations have been terminated owing to a longer than expected injury to their defender Benoit Poulain.
Speaking on the Club Brugge website, Denswil said: "I was open for conversations with other teams. That's why I also travelled to Brighton.
"It remains my ambition to step up to a higher level. Only all parties must be able to find out, which was not the case. I have a long-term agreement with Club and that has been very much in my mind since my arrival. Tomorrow I will be on the training field in Brugge again and there will also be my full focus."
Denswil has been capped for Netherlands from under-15 to under-21 level and has scored three goals in 78 games for Brugge. He started his career at Ajax, where he netted once in 22 matches.