European Commission opens infringement proceedings against Hungary over crypto-asset validation regime

The European Commission has launched an infringement proceeding (INFR(2025)2174) against Hungary for failing to fully comply with Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA). The proceeding follows Hungary's adoption of Act LXVII. of 2025. which amended Act VII. of 2024. on the market of Crypto-Assets to introduce a novel crypto-asset conversion validation regime backed by criminal sanctions. Hungary’s framework appears to have no basis under MiCA and has prompted an exodus of crypto-asset service providers from the Hungarian market.

Background

• 23 June 2025: Act LXVII of 2025 entered into force, introducing amendments to both the Criminal Code and the Crypto Act, which provided that that all exchanges of crypto-assets-whether for funds or other crypto-assets must be validated by a newly created category of licensed entity: the exchange of crypto-asset conversion validation service provider. Exchanges conducted without a certificate of compliance became classified as "unauthorised crypto-transactions" and rendered legally invalid. The amendments also criminalised non-compliant behaviour, with penalties ranging from up to two years' imprisonment for exchanges of significant value (HUF 5 million to HUF 50 million) to up to eight years for transactions exceeding HUF 500 million. The problem: as long as there were no crypto-asset conversion validation service providers approved by SARA in the system, numerous crypto-asset exchanges was deemed unlawful.
• 27 October 2025: Hungary's Supervisory Authority of Regulated Activities (SARA) issued Decree 10/2025, clarifying the authorisation requirements for validation service providers. The Decree established stringent conditions, including minimum registered capital of HUF 80 million, certified information security management systems, professional liability insurance with a minimum annual limit of HUF 250 million, and qualified personnel holding degrees in economics, law enforcement, IT or law. Notably, SARA did not register any validation service providers at the time of the Decree's issuance, thus making it impossible for companies to validate any transaction falling under the legal regime.
• December 2025 to early 2026: Several market actors such as a European fintech giant and a national-founded company suspended their crypto services in Hungary, citing regulatory burdens. Subsequently, additional providers also exited the Hungarian market for the same reason.
• 19 December 2025: Nearly six months after the validation requirement took effect, SARA registered its first (and to date only) crypto-assets validation service provider named Caduceus Private Limited Company.

The Commission’s reaction

At the end of last week, the European Commission formally initiated an infringement procedure against Hungary on the matter. The Commission's letter of formal notice identifies a fundamental incompatibility between Hungary's validation regime introduced by Act LXVII. of 2025 and MiCA's harmonised framework. MiCA establishes a uniform and directly applicable regulatory structure designed to ensure legal certainty, consumer and investor protection, financial stability, and the smooth functioning of the single market for crypto-assets.

The Commission notes that this regime has reportedly caused a substantial number of crypto-asset service providers to suspend or discontinue certain services, prejudicing clients and creating legal uncertainty. While acknowledging Hungary's efforts to strengthen anti-money laundering and counter-terrorist financing (AML/CFT) safeguards, the Commission emphasised these measures must remain compatible with MiCA.

What happens next?

Hungary now has two months to respond to the Commission's concerns. In the absence of a satisfactory response, the Commission may proceed to issue a reasoned opinion, which is the next formal step in the infringement procedure that could ultimately lead to proceedings before the EU Court of Justice.

For market participants still operating in Hungary, the infringement proceedings introduce an additional layer of uncertainty. Crypto-asset service providers, payment institutions and intermediaries should continue to monitor developments closely, including any amendments to the validation regime that Hungary may introduce in response to the Commission's concerns. Banks and payment service providers servicing exchanges should maintain robust due diligence to confirm counterparties' validation status and liability coverage.

For more information on the infringement proceedings and Hungary's crypto-asset regulatory framework, contact your CMS client partner or the CMS experts listed below.

This article is co-authored by Péter Virányi.