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Hungary has enacted stringent new regulations criminalizing the use and operation of unauthorized cryptocurrency exchanges, marking a significant shift in its approach to crypto governance.
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The updated Criminal Code introduces prison sentences ranging from two to eight years, depending on the scale of unauthorized crypto activities, reflecting growing regulatory scrutiny in the region.
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According to COINOTAG, the ambiguity surrounding compliance frameworks has created uncertainty among crypto businesses, highlighting the challenges of regulatory adaptation in emerging markets.
Hungary’s new crypto laws impose prison terms for unauthorized exchange use, raising compliance challenges amid unclear regulatory frameworks and impacting crypto service providers.
Hungary’s Criminal Code Update: Defining Unauthorized Crypto Exchange Use and Penalties
On July 1, Hungary implemented a pivotal amendment to its Criminal Code targeting unauthorized crypto-asset exchange activities. The legislation criminalizes the use of unlicensed crypto exchanges, prescribing penalties that escalate with the transaction value. Specifically, individuals trading between 5 million and 50 million forints (~$14,600 to $145,950) face up to two years in prison. This sentence increases to three years for transactions between 50 million and 500 million forints (~$145,950 to $1.46 million), and can reach five years for amounts exceeding 500 million forints.
This tiered penalty structure underscores the government’s intent to deter illicit crypto trading and protect the integrity of its financial system. The law’s granular approach to valuation-based sentencing is a notable development in European crypto regulation, signaling Hungary’s commitment to stringent oversight.
Criminalizing Unauthorized Crypto Service Providers: Legal Implications and Enforcement
Complementing the restrictions on exchange users, the updated code also targets unauthorized crypto-asset exchange service providers. Operators facilitating unlicensed crypto services face prison terms of up to three years for offenses involving up to 50 million forints (~$145,950). For larger-scale violations, penalties can escalate to five years for amounts up to 500 million forints and up to eight years for offenses exceeding that threshold.
This legal framework places significant responsibility on crypto service providers to secure proper authorization, aligning with broader European Union efforts to regulate digital asset markets. The absence of immediate compliance guidelines, however, has left many providers in a state of uncertainty, awaiting regulatory clarity from Hungary’s Supervisory Authority for Regulatory Affairs (SZTFH).
Market Reactions: Revolut’s Temporary Withdrawal and Subsequent Reinstatement of Crypto Services
The regulatory changes have already impacted market participants. UK-based fintech Revolut initially suspended all crypto services in Hungary, including withdrawals, citing the new legislation as the cause. This move highlighted the operational risks companies face amid evolving legal landscapes.
Subsequently, Revolut reinstated crypto withdrawals, signaling a partial adaptation to the regulatory environment while its EU division pursues a formal crypto license. This development reflects a cautious but proactive approach by fintech firms navigating complex compliance demands.
Industry Challenges and Future Outlook for Crypto Regulation in Hungary
The lack of immediate regulatory guidance following the law’s enactment has created a compliance vacuum, complicating operational decisions for crypto businesses. The SZTFH’s 60-day window to establish frameworks is critical for clarifying enforcement mechanisms and licensing procedures.
Experts emphasize the importance of transparent and timely regulatory communication to foster a secure and compliant crypto ecosystem. Hungary’s approach may serve as a precedent for other jurisdictions balancing innovation with risk mitigation in the digital asset space.
Conclusion
Hungary’s updated Criminal Code represents a decisive move to regulate cryptocurrency activities through criminal penalties for unauthorized exchange use and service provision. While the laws aim to enhance market integrity and consumer protection, the interim regulatory ambiguity poses challenges for crypto operators. The forthcoming compliance frameworks from SZTFH will be instrumental in shaping Hungary’s crypto landscape, offering clearer pathways for lawful participation in the digital economy.
