Hungary to criminalise crypto-asset exchange violations with restrictive validation obligation for service providers and clients
Hungary has passed a legislative package amending Act C of 2012 of the Criminal Code and Act VII of 2024 on the crypto-asset market (i.e. the Crypto Act), which introduces a new element: the crypto-asset validation service provider that was created to enhance security and transparency, but in the process produces a more centralised and restrained transaction scheme tainted by possible criminal sanctions.
New player in the crypto ecosystem: crypto-asset conversion validation service providers
Pursuant to the amendments to the Crypto Act effective 1 July 2025, exchanging crypto-assets for funds or other crypto-assets can only be carried out with a compliance certificate issued by a crypto-asset conversion validation service provider. Crypto-asset exchanges lacking a certificate of compliance constitutes an “unauthorised crypto-transaction” and under the Crypto Act any linked asset transfer will be deemed invalid, incapable of producing legal effect, and cannot be the subject of money transmission services.
The amendments introduce a new legal entity called a crypto-asset validation service provider, which must be authorised by the Supervisory Authority of Regulated Activities (SARA). After receiving authorisation, the service provider carries out validation processes in the following way: it examines the origin of the crypto-asset, identifies the ownership of the device or wallet used for storing the crypto-asset (as well as any associated natural or legal persons), carries out a profile-based assessment of the user, and performs verifications against relevant external databases. Based on the new law, if the validation service results in the successful identification of the client and transaction related to the conversion order, the crypto-asset conversion validation service provider must issue a compliance certificate.
The new amendment sets out high-level rules for personnel, executives, and owners of crypto-asset conversion validation service providers, which involve conflict of interest issues. The Hungarian SARA will issue regulations detailing these rules.
New criminal offence related to crypto-asset conversions
The amendments of the Hungarian Criminal Code also introduce two new statutory criminal offences regarding the exchange of crypto-assets. Pursuant to Section 394/A, any person (legal or natural) who exchanges crypto-assets of significant value (HUF 5 million to HUF 50 million) for fiat currency or other crypto-assets by using an unauthorised crypto-asset exchange service will, unless the act constitutes a more serious criminal offence, be guilty of a misdemeanour punishable by imprisonment of up to two years. For exchanges of between HUF 50 million and HUF 500 million, the punishment is five years imprisonment, and for exchanges of more than HUF 500 million, the punishment can be up to eight years imprisonment.
Mirroring the criminal offence set out in Section 394/A, Section 408/A prescribes that any person who conducts crypto-asset conversion service activities of significant value (HUF 5 million to HUF 50 million) in violation of the validation requirements established by the Crypto Act is guilty of a felony punishable by imprisonment of up to three years, which may increase to eight years should the value exceed HUF 500 million.
As the enforcement date of 1 July approaches, crypto-asset experts are hotly debating the purpose, means and long-term consequences of the amendments. In addition to the concerns raised above, the fundamental problem professionals are facing is learning the exact meaning behind the text of the new regulations.
Another main concern is that any individual or entity – even companies who have been spending significant time and resources on compliance – that operate without validation or the appropriate authorisation may be subject to criminal proceedings. This includes decentralised exchanges, smart contracts, and peer-to-peer trading activities.
Experts also raise the issue of a visible deterioration from both regional and EU scale trends regarding the liberalisation of crypto-asset exchange, which may place Hungarian market participants at a competitive disadvantage. In the context of the global rise of decentralised finance, such a rigid and administratively burdensome system may encourage capital flight and the relocation of businesses abroad, which could reduce Hungary’s attractiveness as a business centre.
From a societal perspective, it is both concerning and perplexing that the regulation criminalises behaviour that does not seem to harm the public interest and does not cause financial loss or endanger the stability of the financial system. Among younger generations, where crypto usage is on the rise, such criminal restrictions may alienate users and undermine long-term trust in financial innovation.
Experts argue that one of the fundamental advantages of blockchain technology lies in its ability to validate transactions in a decentralised, transparent, and technically secure manner. Therefore, introducing legal entities as validators creates a centralised, costly, and potentially abusive system that restricts user autonomy on an administrative rather than technical basis.
Since the new regulations criminalise certain practices of both service providers and users in the crypto-asset market, all parties must ensure compliance with the amended regulation as soon as possible in order to head off any hardship.
For more information on Hungary’s new crypto-asset exchange regime, contact your CMS client partner or these CMS experts.
The article was co-authored by Barnabás Czakó.
