CMS Expert Guide to Crypto Regulation in Hungary
- How is crypto regulated?
- What are the steps taken by the regulator to adopt MiCAR?
- Are the following activities regulated or unregulated in your jurisdiction? ― Direct sales of tokens by issuers— Exchange (buy/sell) ― Custody (hold) ― Borrowing/lending ― Yield/staking services —Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible cryptoassets for each activity)
- Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis?
- How long would establishing a cryptoasset business/obtaining a license in your jurisdiction take?
- What would be the approximate overall cost of obtaining a licence?
- What is the probability (%) of success in obtaining a licence?
- What other limitations are there in your jurisdiction when looking to set up a cryptoasset business? E.g., Compliance requirements and physical presence
jurisdiction
Disclaimer: This chapter was last updated on 29 May 2024 and does not reflect any subsequent developments. The information provided is intended for general informational purposes and should not be construed as legal advice.
1. How is crypto regulated?
| AML Regulation | Any other regulation |
Providers of exchange services between virtual currencies and fiat currencies, between different types of virtual currencies, and custodian wallet providers, fall under the scope of the Hungarian AML Act (Act LIII of 2017 on the prevention and combatting of money laundering and terrorist financing). Among other things, they need to conduct a full customer due diligence:
According to the Hungarian AML Act, ‘Custodian wallet provider’ means an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies. The Hungarian AML Act also applies to financial services institutions, including but not limited to payment institutions, regarding their activities that fall within the framework of payment services and electronic money institutions, and their activities falling within the framework of issuance of electronic money and payment services. Consequently, the AML Act applies to e-money token issuers. | Cryptocurrencies and NFTs (non-fungible tokens) are not regulated by the financial services regulation in Hungary. Asset-referenced tokens and utility tokens are not regulated by Hungarian law. However, security tokens can fall under the scope of the financial services regulation (securities) depending on what kind of right is securitised in the tokens. This means that STOs can be deemed as securities in Hungary. STOs are currently unregulated in Hungary, and it is decided on a case-by-case basis whether an STO-like scheme would fall under securities or investment regulations. In this case, the following Hungarian acts will apply:
E-money tokens are regulated by:
Act CCXXXVII on credit institutions and financial enterprises (Hungarian Banking Act). |
2. What are the steps taken by the regulator to adopt MiCAR?
From 30 June 2024:
The Hungarian legislature has passed Act VII of 2024 on the market in crypto-assets, designating the Central Bank of Hungary (CBH) as the competent authority responsible for ensuring the compliance of crypto-asset service providers with MiCAR. The government and the governor of the CBH are expected to pass detailed rules in the near future.
The Hungarian Act adds new provisions to MiCAR:
- 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 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.
DORA Regulation and NIS2 directive for crypto-asset providers
In the Hungarian 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 MiCAR 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.
3. Are the following activities regulated or unregulated in your jurisdiction? ― Direct sales of tokens by issuers— Exchange (buy/sell) ― Custody (hold) ― Borrowing/lending ― Yield/staking services —Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible cryptoassets for each activity)
| AML Regulation | Any other regulation |
Until 31 December 2024: Partially, yes, the following fall under the scope of the Hungarian AML Regulation:
Typically, this covers the direct sale of tokens, and the purchase, sale and custody of cryptoassets. In principle, crypto borrowing/lending, yield and staking do not fall under the scope of the Hungarian AML Act, except when:
In the borrowing and lending of cryptoassets, regulatory restrictions may apply to the trading platforms, depending on the circumstances of trading and the ways of reaching investors, e.g. a business-like lending activity may require a licence from the CBH. In this case, borrowing/lending cryptoassets falls under the scope of the Hungarian AML Act. From 1 January 2025: Because of the MiCAR, the Hungarian AML Act shall apply to all types of crypto-asset providers according to article 3 (1)/15 of the MiCAR, if the provider provides one or more crypto-asset services under article 3 (1) / 16 of the MiCAR. However, crypto-asset advice services according to article 3 (1)/16 h) do not fall under the Hungarian AML Act. | Until 31 December 2024: In principle, none of the above activities are regulated per se. However, it may be that due to the design of the cryptocurrency or the NFT itself, the scope of application of one or more of the above laws is fulfilled. For example: If a stable coin is considered e-money (e-money token), the Hungarian PSP Act, the Payment Services Act and the Hungarian Banking Act may apply. Offering security tokens or NFTs to the public might trigger the issuer’s obligation to publish a prospectus under the EU Prospectus Regulation or the Hungarian Capital Market Act. Operating a marketplace for trading in security tokens and NFTs likely triggers licensing obligations within the meaning of Hungarian Investment Fund Act and the Hungarian Capital Market Act. From 1 January 2025: MiCAR shall apply. |
4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis?
| AML Regulation | Any other regulation |
| N/A | Third country businesses may only provide securities, investments and e-money services within Hungary via an established branch office or subsidiary. In case of non-regulated activities, third country businesses may rely on both active and reverse solicitation. |
5. How long would establishing a cryptoasset business/obtaining a license in your jurisdiction take?
| AML Regulation | Any other regulation |
Until 31 December 2024: Providers of exchange services between virtual currencies and fiat currencies, between different types of virtual currencies, and custodian wallet providers must register with the financial intelligence unit of the National Tax and Customs Administration before commencing their business activities. The registry procedure must be concluded within 60 days. From 1 January 2025: Crypto-asset providers according to article 3 (1)/15 of the MiCAR, if the provider provides one or more crypto-asset services under article 3 (1) / 16 of the MiCAR (except for crypto-asset advice services according to article 3 (1)/16 h)), must register with the financial intelligence unit of the National Tax and Customs Administration before commencing their business activities. The registry procedure must be concluded within 60 days. | Until 31 December 2024: Generally, no licence is needed for a cryptoasset business. Cryptoasset businesses must follow the standard company establishment procedure in Hungary if they would like to establish a Hungarian legal entity, which is not mandatory. E-money token issuers need an e-money institution licence in Hungary. As a main rule, the CBH’s deadline for issuing its decision on a licence is three months from the date where all the necessary information and documents have been submitted to the CBH, which can be extended one time by a further three months. This deadline does not include the deadlines given by the CBH for providing more information, modifying documents, or submitting additional documents. For the fulfilment of these requests, the CBH usually allows 30 days, which can be extended one time. The CBH can order the above in several rounds during a single procedure. In practice, it takes approximately 6–18 months to obtain an e-money (token) issuer licence in Hungary, because of the several rounds of document submission, information provision, IT security and other negotiations with the regulator. The length of the procedure depends on the quality of the documentation submitted to the CBH and the number of rounds in which the regulator asks for more information, modification of the documentation, and explanations of different issues. The above procedure and deadlines also apply to CBH licences under the Hungarian Investment Fund Act and Capital Market Act in the case of security tokens. From 1 January 2025: MiCAR shall apply. Until the publication date of this updated guide, there were no licence procedure initiated under the MiCAR in Hungary before the Hungarian regulator. According to the experience of the other types of licencing procedure (for example for e-money issuance, payment services, security tokens), we expect that obtaining a MiCAR licence will take approximately 6–18 months because of the several rounds of document submission, information provision, IT security and other negotiations with the regulator. The length of the procedure depends on the quality of the documentation submitted to the CBH and the number of rounds in which the regulator asks for more information, modification of the documentation, and explanations of different issues. |
6. What would be the approximate overall cost of obtaining a licence?
| AML Regulation | Any other regulation |
| The AML registry procedure is free of charge. | Until 31 December 2024: Generally, no licence is needed for a cryptoasset business. In the case of e-money (token) issuers, the overall costs of obtaining the licence, including the fees to be paid to the regulator, legal costs, and IT security consultation costs, can reach EUR 400,000. The procedural fee is HUF 1.1 million (approx. EUR 3,000). These fees do not include the costs of establishing a legal entity (company) in Hungary. From 1 January 2025: The MiCAR licence procedure is currently free of charge. Legal and IT security advisory costs can reach EUR 400,000. |
7. What is the probability (%) of success in obtaining a licence?
| AML Regulation | Any other regulation |
| If the provider’s managing directors are not subject to any of the disqualifying factor and the provider has correctly provided all necessary information, the registry procedure is automatic. | Until 31 December 2024: If a licence is necessary for any activities regarding cryptoassets in Hungary, the possibility of obtaining a licence is difficult to estimate, but it must be mentioned that the Hungarian regulator encourages e-money (token) issuers to request an e-money (token) issuer licence in Hungary. The regulator provides clear requirements during the procedure, and has published several support materials, legal interpretations, and a list of the necessary documents for the licencing process. If the e-money (token) issuer complies with these requirements and submits all the necessary documents in the required quality, with the required content and follows the CBH’s instructions on the IT and IT security measures, the chance of successfully obtaining a licence is more than 90%. From 1 January 2025: Until the publication date of this updated guide, there were no licence procedure initiated under the MiCAR in Hungary before the Hungarian regulator. |
8. What other limitations are there in your jurisdiction when looking to set up a cryptoasset business? E.g., Compliance requirements and physical presence
| AML Regulation | Any other regulation |
| For AML requirements, see the answer to Question 1. | Should a cryptocurrency service fall under the scope of any of the above-mentioned financial services regulations and thus require a licence, the specific regulation’s rules and stipulations need to be complied with when applying. As cryptoasset services are often sold via internet, the service provider must comply with e-commerce regulations, and if the customers are consumers, then with consumer protection regulations. Compliance with tax laws is also a must. The Hungarian Act on Personal Income Tax contains special taxation rules for incomes arising from cryptoasset transactions, including crypto mining and crypto trade. Once tokens are traded, regulatory restrictions may apply to the trading platforms, depending on the circumstances of trading and the ways of reaching investors, e.g. a business-like lending activity may be subject to a licence from the CBH. If tokens are classified as securities and are traded on a regulated market, the issuer must observe market follow-up obligations, e.g. according to the Market Abuse Regulation (Regulation EU No. 596/2014). Corporate law restrictions may also apply. For example, in Hungary a limited liability partnership (korlátolt felelősségű társaság), limited partnership (betéti társaság) and private limited company (zártkörűen működő részvénytársaság) may not recruit investors publicly, therefore such entities may not launch security token offerings under Hungarian corporate rules. A physical presence in Hungary is not required. However, in the case of regulated cryptocurrency services, which can be provided on a cross-border basis based on passporting the licence obtained in another EU member state, the regulator can require the company to establish a Hungarian entity, such as a Hungarian branch office or a subsidiary. |
