In our previous articles we have introduced the relevant Hungarian regulation of crypto assets, the underlying technology and the accounting and tax aspects of the regulation. In this article, we summarise the history of Hungarian regulation and present the latest law on crypto assets, the Act VII of 2024 on the Crypto assets Market (hereinafter referred to as the “Crypto Act”).

History of Hungarian crypto regulation in a nutshell

Given that we have explored the regulation to date in earlier articles, the following aims to provide a brief summary of the previous stages of crypto regulation. Before 2022, there was no specific regulation of crypto assets in Hungary, which had negative effects from taxation point of view, as due to the unfavourable tax rules and the fact that the tax authorities had little to no insight into the income from crypto assets – due to the nature of crypto –, many people decided against declaring the income from crypto assets, thus causing a serious loss of revenue for the state. This has been changed by the Personal Income Tax (hereinafter referred to as the “PIT Act”) amendment of 2022, which has classified cryptocurrency income as a separate taxable income instead of “other income”, thus reducing the effective tax burden from 26.5% to 15%. In addition, the PIT Act defined several concepts related to cryptocurrencies and introduced tax equalisation rules in order to establish a compliant cryptocurrency market in Hungary.

The Crypto Act

While some EU countries have developed comprehensive crypto regulations, such as Malta, Luxembourg or Liechtenstein, in Hungary crypto assets were only regulated in the PIT Act, leaving many areas unregulated, such as the development of an appropriate supervisory system, ensuring market stability, or consumer and investor protection. These areas were regulated by the European Union in the so-called MiCa Regulation[1], which Hungary implemented with the Crypto Act. The new adopts the uniform terminology used by the European Union and designates the central bank, Magyar Nemzeti Bank (“MNB”) as the supervisory body. The law also provides for complaint handling rules, under which the crypto asset provider is obliged to ensure that customers have the possibility to lodge complaints orally or in writing about its activities. The service provider must keep such complaints for five years and present them to the MNB upon request.

The MNB is also granted a number of other supervisory powers, such as the power to identify infringements, issue a notice naming the person(s) responsible and banning the offending natural persons from managing crypto asset issuers and service providers, suspend or prohibit the provision of services in the event of a breach of law or of a customer interest, modify, suspend or prohibit marketing communications, impose fines, or require any person to reduce the size of their position or exposure to crypto assets. With this wide range of tools, the regulator can ensure the stability of the crypto market and the protection of consumers and investors.

With this law, the legislator has fully harmonised Hungarian domestic law with the standards of the European Union, establishing a single, predictable set of rules.

[1] Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937