Hungary Enforces Harsh Crypto Penalties: Up to 8 Years Prison

- Individuals face up to two years in prison for unauthorized crypto use. - Unlicensed service providers risk imprisonment of up to five years. On July 1, 2024, Reuters reported that Hungary has updated its Criminal Code, introducing harsh penalties for unauthorized cryptocurrency trading and services, effective July 1, 2024. The amended law imposes prison sentences on individuals and service providers who engage in unlicensed crypto activities. Under the new law, individuals using unapproved exchanges for transactions above 5 million forints (approximately $14,600) face up to two years in prison. Meanwhile, service providers facilitating unauthorized trades face even harsher sentences of up to eight years for transactions exceeding 500 million forints ($1.46 million). Compliance uncertainty is already disrupting Hungary's crypto sector. The law mandates a "conversion-validation certificate" for all trades and requires crypto service providers to secure operating licenses supervised by the Hungarian National Bank. However, Hungary’s Supervisory Authority for Regulatory Affairs (SZTFH) has not yet published the necessary compliance frameworks, despite having a 60-day deadline to do so. These new legal measures have caused immediate repercussions in the industry. For instance, the UK-based fintech company Revolut initially suspended all crypto services for Hungarian users before reinstating only withdrawal functionality. Likewise, the major cryptocurrency exchange Crypto.com has halted its services. Industry stakeholders also note that Hungary’s penalties are far harsher than those in the European Union's Markets in Crypto-Assets (MiCA) framework. As a result, this legislative overhaul impacts an estimated 600,000 Hungarians who hold digital assets, many of whom now find themselves in a legal grey area while awaiting clearer directives from regulators. Furthermore, observers argue that the law aims to discourage crypto trading altogether rather than create a fair regulatory environment for its safe and legal use.