On 17 April 2024, the Hungarian parliament adopted Act VII of 2024 on Markets in Crypto-Assets, which will enter into force on 30 June 2024 and lay down provisions necessary for the Hungarian implementation of the Markets in Crypto-Assets Regulation (MiCA) and the Digital Operational Resilience Act (DORA).
In the EU, the framework regulation for crypto-assets is covered by MiCA. However, the exceptions provided to member states in MiCA and the wide range of potential service providers make it necessary to regulate crypto-assets and services in domestic legislation as well.
Scope
For crypto entities, the scope of application of the new law is the same as MiCA, and includes the following:
- the issuance, offer to the public and admission to trading of crypto-assets in Hungary;
- the provision of crypto-asset services within the territory of Hungary; and
- the supervisory activities performed by the Hungarian authorities, as specified in the Act.
Based on the Act, crypto entities must operate and provide their services in Hungary in accordance with MiCA.
Extra rules for the provisions of crypto-asset services in Hungary
The Act adds new provisions to MiCA:
- Knowledge and experience: natural persons acting on behalf of service providers ‘providing advice on crypto-assets’ must have the necessary knowledge and professional experience to provide such advice, the detailed rules of which will be laid down in an implementing government decree that has not been adopted yet. This new additional provision was the subject of much professional debate before the law was passed, and the government has decided to set out the details in a separate government decree rather than stipulating detailed rules in the Act.
- Complaint handling: the Act contains detailed provisions on the handling of complaints, which may be made in person, by telephone or in writing, and by post or electronic mail. For complaints made by telephone, the provider must record the phone conversation and keep the recording for five years. Complaints must be kept for five years. The language used when handling complaints must be Hungarian (with exceptions).
- Consumer protection: the provider must appoint a contact person for consumer protection issues.
Supervision – competent authority and supervisory measures
The new Act designates the National Bank of Hungary (NBH) as the competent supervisory authority of crypto-asset service providers and introduces 25 new supervisory measures to the NBH’s existing measures. The new measures largely follow the existing supervisory toolbox of the NBH under other existing regimes, such as the Markets in Financial Instruments Directive (MiFID) and the Capital Requirements Directive (CRD), with necessary modifications for the crypto market. They also contain certain new measures specifically designed for crypto-asset service providers and holders of crypto-assets (e.g. the NBH may require any person to reduce their position or exposure to crypto-assets in the event of a breach of law, taking into account the principles of gradualness and proportionality).
DORA Regulation and NIS2 directive for crypto-asset providers
In the Act, based on Article 19 of the DORA regulation, the NIS2 directive is applied to crypto-asset providers and issuers of asset-referenced tokens under MiCA and has stipulated that these entities:
- must report the significant ICT-related incidents to the NBH and the Hungarian CSIRT under the NIS2 directive; and
- if they report significant cyber threats to the NBH on a voluntary basis, they must report it in parallel to the Hungarian CSIRT under the NIS2 directive.
Although this is allowed by the DORA, this represents a significant change to the DORA regulation and makes the reporting obligations of crypto-asset service providers more difficult.
Amendments to existing regimes
The Act amends the respective implementing laws and regulations of the various existing EU regimes regulating money and capital markets and extends the scope of the licensable activities of MiFID investment firms, CRD credit institutions, CRD financial enterprises, PSD payment service providers, UCITS fund managers and AIFMs to crypto-asset services.
Next steps
As noted above, the implementing government decree and the implementing NBH decrees of the Act have not yet been adopted and are expected to be issued on or about 30 June 2024 when the Act enters into force.
For more information on the Act and on the latest developments regarding the implementing government decree and NBH decrees, contact your CMS client partner or these CMS experts.
