Hungary scraps crypto trading penalties of up to eight years in prison

Hungary has repealed its mandatory crypto conversion validation system and removed two related criminal offenses that exposed users and service providers to prison terms of up to eight years.
Summary

• Hungary has removed mandatory validation checks for crypto conversions.
• Two crypto offenses carrying prison terms of up to eight years have been repealed.
• The rules took effect on Aug. 7 after Parliament approved the repeal on July 31.
• The changes remove a separate national compliance layer alongside the EU's MiCA framework.

The Hungarian Parliament passed Act XXXVIII of 2026 on the Repeal of Certain Statutory Provisions Concerning Crypto-Asset Conversion Services, removing a national validation requirement that had applied to crypto-to-fiat and crypto-to-crypto conversions.

Approved by Parliament on July 31 and effective from Aug. 7, the legislation removes the validation process and associated criminal penalties after the rules created a separate compliance requirement for crypto businesses operating in Hungary.

Under the previous system, covered crypto conversions had to pass through an authorized validation provider. Transactions completed without the required validation could qualify as unauthorized crypto transactions under Hungary's criminal law.

András Gaál, an associate at law firm Schoenherr, said converting crypto assets without prior validation had constituted an unauthorized crypto transaction under Act C of 2012 on the Criminal Code.

Hungary removes crypto offenses tied to validation

Alongside the validation requirement, Parliament has removed two criminal offenses introduced under the previous framework.

The first offense, called "Abuse of crypto assets," applied when a person exchanged crypto assets of significant value for money or other crypto assets through an unauthorized crypto-asset exchange service.
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A violation could carry a prison sentence of up to two years, while the maximum penalty increased for transactions involving larger amounts. Under particularly serious circumstances, the offense could carry as much as five years in prison.

The second offense, "Unauthorized crypto-asset exchange service provision," applied to providers conducting exchange activities of significant value while violating the country's validation requirement.

Basic violations carried prison sentences of up to three years, while more serious cases could result in imprisonment of as much as eight years.

Hungary had introduced the criminal provisions as part of a crypto framework that came into force in 2025, creating uncertainty for exchanges and other service providers because firms serving Hungarian customers had to comply with a separate national validation process.

As previously reported by crypto.news, the rules that took effect in July 2025 required crypto exchanges to pass through a state-controlled validation process involving checks on the origin of funds, wallet ownership, customer identity and user profiles.

At the time, individuals using unauthorized crypto services could face prison terms depending on the value involved, while service providers processing particularly large transaction volumes faced sentences of up to eight years.

Local estimates cited at the time put the number of Hungarians involved in cryptocurrency activities at roughly 500,000.

The regulatory uncertainty also affected crypto companies operating in the country. Revolut suspended its crypto services in Hungary after the rules took effect, while some other firms considered moving operations to EU jurisdictions including Estonia and Lithuania.

Hungary reverses its 2025 crypto crackdown

The repeal completes a reversal that the Hungarian government had signaled earlier this year as it reconsidered the criminal provisions and the country's separate validation regime.

On June 11, the government confirmed plans to remove the penalties after the 2025 restrictions disrupted domestic crypto trading and prompted platforms to reduce services.

The planned crypto rollback followed Hungary's April parliamentary election, which brought the Tisza Party to power after 16 years of government under former Prime Minister Viktor Orbán.

Government spokeswoman Anita Kobol said at the time that Hungary intended to reverse measures introduced under the previous administration. Newly appointed Minister of Innovation and Technology Zoltán Tanács described the former framework as "excessive and politically driven."

Hungarian authorities were also facing questions from the European Union over whether the country's validation requirements were compatible with the bloc's Markets in Crypto-Assets Regulation.

The European Commission had opened an investigation into the Hungarian rules, according to Kobol, adding another regulatory issue for a system that required exchanges operating in Hungary to satisfy national requirements on top of the EU framework.

Transactions converting crypto into fiat currency or another crypto asset required a compliance certificate from a licensed local validator. Without the certificate, the transaction could be considered legally invalid.

Hungary also created a separate category of crypto conversion validation service providers overseen by the country's Supervisory Authority of Regulated Activities.

Before issuing certificates, validators could be required to check the origin of crypto assets, identify wallet or device ownership, examine customer profiles and compare transaction information against external databases.

MiCA rules replace Hungary's separate crypto checks

Katalin Horváth, a partner at CMS Budapest, said the Hungarian system was incompatible with the EU internal market and duplicated protections already established through MiCA.

MiCA provides a common licensing framework for crypto-asset service providers across the European Union and allows authorized companies to serve customers in other member states through passporting arrangements.

The repeal means companies operating under the European framework no longer need to route covered Hungarian conversions through the separate national validation system.

The timing also follows the end of the EU's MiCA transition period on July 1, when crypto firms that had been operating through legacy national registrations faced new restrictions unless they secured authorization under the bloc's regulatory framework.

Shortly after the deadline, the European Securities and Markets Authority added another 57 authorized firms to its register, bringing the total to 300 at the time.

The July 3 MiCA register expansion included Standard Chartered and FalconX, with approved providers gaining passporting rights across all 27 EU member states. Firms without the required authorization had to stop onboarding new customers and begin winding down covered regulated services.

Other companies have since secured authorization through individual EU regulators and used MiCA passporting to expand their regulated operations.

BitPay, for example, received authorization from the Dutch Authority for the Financial Markets in July through its Netherlands-based entity.

The company's Dutch MiCA approval allows it to provide regulated crypto services across eligible EU markets, including cryptocurrency payments and stablecoin transactions.

The European licensing system has also moved beyond the initial authorization stage. ESMA began reviewing the operational resilience of MiCA-authorized crypto custodians in July, examining areas including custody controls, key management, incident response and third-party risks.

For companies serving Hungarian customers, Act XXXVIII of 2026 removes the additional domestic validation layer that had operated alongside the EU system.

Horváth said payment institutions, crypto-asset service providers and intermediaries that had routed covered conversions through authorized validators should now unwind those processes.
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