Hungary has decided to criminalize cryptocurrency trading on unauthorized platforms starting July 1, 2025—a legislative maneuver that transforms what was previously a regulatory gray area into a potential prison sentence of up to five years for individual traders (and eight years for service providers).
The law introduces two distinct criminal offenses: abuse of cryptocurrencies and provision of unauthorized crypto exchange services, with criminal liability triggered at remarkably modest thresholds of 5 million Hungarian forints (approximately $14,600).
The penalty structure operates on a tiered system that would make even hardened prosecutors wince. Private individuals face up to two years imprisonment for trades between 5 million and 50 million forints, escalating to three years for amounts up to 500 million forints, and reaching the maximum five-year sentence for transactions exceeding that threshold.
Service providers, meanwhile, confront even harsher penalties—up to eight years for facilitating trades above 500 million forints.
The compliance framework requires all crypto-asset exchange transactions to receive validation from authorized validators who issue compliance certificates. Without these certificates, transactions become legally void and unenforceable—a bureaucratic death sentence for digital asset liquidity. The validation process includes examining the origin of crypto-assets and verifying device ownership to identify clients and transactions.
Only service providers meeting strict regulatory conditions under Hungary’s amended Crypto Act and EU MiCA regulations can legally facilitate exchanges. The Central Bank of Hungary has been designated as the competent authority for MiCAR compliance under Act VII of 2024.
The market response has been swift and predictable. Revolut suspended crypto-related services for Hungarian users almost immediately after enforcement began, while approximately 500,000 Hungarians with crypto investments now face legal uncertainty.
The law’s broad and vague wording has created what industry observers describe as among the world’s most restrictive cryptocurrency regulations. This approach starkly contrasts with other jurisdictions where regulatory clarity has proven essential for fostering mainstream adoption and institutional confidence.
Perhaps most troubling is the criminalization of previously legal activities without clear implementation guidelines. The legislation threatens to spark a significant exodus of fintech and crypto service providers from Hungary, potentially stifling the country’s digital innovation sectors.
Analysts warn that the unclear definitions and enforcement practices create disproportionate prosecution risks for legitimate market participants.
This regulatory overreach raises fundamental questions about proportionality in financial crime enforcement. Whether Hungary’s draconian approach will serve as a cautionary tale or inspire copycat legislation elsewhere remains to be seen—though the early market disruption suggests the former outcome is more likely.
