Hungary Imposes Up To 8-Year Prison Terms For Unauthorized Crypto Trading

Hungary has enacted new laws that impose severe penalties on individuals and service providers involved in unauthorized cryptocurrency trading. Effective July 1, the updated Criminal Code stipulates that using an unauthorized crypto-asset exchange service can result in up to two years in prison. The severity of the punishment increases with the value of the transactions, with penalties rising to three years for trades between 50 million and 500 million forints, and up to five years for transactions exceeding 500 million forints.

The legislation also targets unauthorized crypto service providers, imposing penalties of up to three years in prison for activities involving up to 50 million forints. For larger operations, the penalties can escalate to five years for trades up to 500 million forints and up to eight years for transactions exceeding this amount. This stringent regulatory framework aims to curb illicit activities in the cryptocurrency space, but it has also created significant confusion and uncertainty among crypto companies operating in Hungary.

The Supervisory Authority for Regulatory Affairs (SZTFH) has been given 60 days to develop compliance frameworks for the new laws. However, the lack of immediate guidance has left many companies in a state of limbo, unsure of how to navigate the new regulatory landscape. This uncertainty has prompted some companies to consider relocating their operations to more crypto-friendly jurisdictions. For instance, the UK-based fintech company Revolut temporarily suspended its crypto-related services in Hungary due to the new legislation, although it has since reinstated crypto withdrawals.

The broad language of the new law and the absence of clear implementation guidelines have raised concerns about the potential for criminal prosecution of individuals who may have engaged in previously legal cryptocurrency transactions. Approximately 500,000 citizens could be affected by these changes, adding to the regulatory ambiguity and potential legal risks. The cryptocurrency community is awaiting further clarification from regulators, but industry groups have not yet received an official response. This move by Hungary to enforce such strict regulations may isolate the country within the European Union's digital asset regulatory landscape, as other member states continue to develop more nuanced and balanced approaches to cryptocurrency regulation.