Hungary Imposes Strict Penalties for Trading on Unauthorized Crypto Exchanges

Hungary has enacted sweeping new legislation where both unlicensed crypto exchanges and users of such exchanges could potentially face prison time.

This legislation essentially makes the country one of the strictest jurisdictions in Europe for digital asset compliance.

Individuals who trade cryptocurrencies using an “unauthorized crypto-asset exchange service” could potentially be fine between 5 million and 50 million forints or could be sentenced to up to two years in prison. The penalty escalates as the value increases:

For transactions valued between 50 million and 500 million forints, the prison sentence rises to three years. For transactions above 500 million forints can lead to up to five years in prison.

Similarly, the legislature equally harsh punishments on exchanges providing unlicensed services. The exchanges face a prison sentence of up to three years for transactions of up to 50 million forints.

Similar to users, for transactions between 50 million and 500 million forints, the prison sentence is 5 years. And for transactions exceeding 500 million forints, the prison sentence is 8 years.

Local news outlet Telex reported that the law that was passed on July 1 had created panic among crypto companies, as they await for the Hungary Supervisory Authority for Regulatory Affairs to churn out the compliance frameworks for the law, which is targeted to be released in the next 60 days.

However, with no immediate guidance available, local crypto businesses have voiced confusion and concern as they navigate the period of regulatory transition.

Revolut Responds to Compliance Pressures

In response to the new regulations, UK-based fintech company Revolut initially halted all crypto-related services in Hungary, including withdrawals.

Subsequently, Revolut reinstated crypto withdrawals due to the "recently introduced Hungarian legislation, and did not give a timeline for when it would reinstate the services.

But it was later reported that Revolut had reinstated its services, but has only allowed crypto withdrawals. Revolut also revealed that its EU division is actively seeking a crypto license under European regulations.

These legislative changes represent a significant risk for both retail users and crypto service providers operating in Hungary.

With some of the harshest penalties in the region and a lack of immediate compliance guidance, industry participants are left in a state of uncertainty, potentially impacting access to digital assets and the future of crypto innovation in the country.