Hungary’s parliament repeals crypto validation law, scrapping prison terms of up to eight years

Hungary’s parliament voted 143–46 on July 31 to repeal mandatory validation requirements for cryptocurrency conversions and abolish two criminal offenses that carried prison terms of up to eight years, with the law taking effect Aug. 7.

The Hungarian Parliament approved Act XXXVIII of 2026 on July 31, with the legislation officially taking effect on Aug. 7. The move dismantles a controversial compliance system introduced in 2025 that required crypto-to-fiat and crypto-to-crypto transactions to be verified by state-authorized validation providers before they could be considered legally valid.

The repeal is being viewed as one of Europe’s most significant crypto policy U-turns this year, as Hungary abandons a national framework that many legal experts argued duplicated the protections already established under the European Union’s Markets in Crypto-Assets (MiCA) regulation.

Hungary removes mandatory crypto validation and criminal offenses

The biggest change under the new Hungary crypto regulation is the complete removal of the country’s mandatory crypto conversion validation process.

Under the previous law, anyone converting cryptocurrency into fiat money or another digital asset had to obtain a compliance certificate from a licensed validation provider. Those validators were responsible for examining the origin of funds, verifying wallet ownership, confirming customer identity, and comparing transaction data against external databases.

Failure to complete that process could classify a transaction as an unauthorized crypto conversion under Hungary’s Criminal Code.

According to András Gaál, associate at international law firm Schoenherr, converting crypto assets without prior validation previously constituted an “unauthorized crypto transaction” under Act C of 2012.

Parliament has now eliminated the legal foundation for that offense, removing a layer of compliance that applied exclusively within Hungary and sat alongside the EU’s broader regulatory framework.

The repeal also abolishes two criminal offenses introduced during the 2025 crackdown.

The first, known as “Abuse of Crypto Assets,” targeted individuals who exchanged cryptocurrency through unauthorized services. Depending on the value involved, penalties ranged from up to two years in prison to as much as five years for particularly large transactions.

The second offense, “Unauthorized Crypto-Asset Exchange Service Provision,” applied to companies operating exchange services without satisfying Hungary’s validation requirements. Basic violations carried prison sentences of up to three years, while the most serious cases exposed operators to eight years of imprisonment.

A dramatic reversal of the 2025 crypto crackdown

The overhaul marks a complete reversal of legislation introduced just one year earlier, when Hungary crypto regulation became one of the strictest in the European Union.

The 2025 rules created widespread uncertainty across the domestic digital asset industry. Exchanges serving Hungarian customers were required to route transactions through state-approved validators, adding significant operational costs and legal risks.

Local estimates suggested that around 500,000 Hungarians participated in cryptocurrency investing or trading, meaning the regulations affected a substantial portion of the country’s retail crypto community.

The impact was immediate. Financial technology giant Revolut suspended its cryptocurrency services in Hungary after the rules took effect, while several crypto businesses reportedly explored relocating operations to more crypto-friendly EU jurisdictions, including Estonia and Lithuania.

Earlier this year, Hungary’s new government confirmed it intended to dismantle the framework. Government spokeswoman Anita Kobol said the administration planned to reverse measures introduced under the previous government, while Zoltán Tanács, Hungary’s Minister of Innovation and Technology, described the former regime as “excessive and politically driven.”

The rollback followed April’s parliamentary election, which ended 16 years of government under former Prime Minister Viktor Orbán and brought the Tisza Party into power.

MiCA becomes the primary framework for crypto firms

Legal experts say the revised Hungary crypto regulation now aligns the country more closely with the European Union’s single crypto market.

Katalin Horváth, partner at CMS Budapest, argued that Hungary’s previous validation regime conflicted with the EU internal market because it duplicated safeguards already required under MiCA.

“The Hungarian system was incompatible with the EU internal market and duplicated protections already established through MiCA,” Horváth said.

MiCA establishes a standardized licensing regime for crypto-asset service providers across all 27 EU member states. Once authorized by one national regulator, eligible firms can use passporting rights to legally offer regulated crypto services throughout the European Union without obtaining separate licenses in every country.

For businesses operating in Hungary, the repeal means covered crypto conversions no longer need to pass through domestic validation providers before execution.

That change significantly reduces regulatory friction for exchanges, payment companies, and custodial service providers already operating under MiCA authorization.

What the repeal means for Hungary’s crypto industry

The timing is particularly significant because it comes shortly after the EU’s MiCA transition period ended on July 1.

Following that deadline, crypto companies relying on legacy national registrations faced stricter restrictions unless they secured full MiCA authorization. The European Securities and Markets Authority (ESMA) subsequently expanded its register by adding 57 newly authorized firms, bringing the total number of licensed providers to around 300.

The list included major institutional players such as Standard Chartered and FalconX, both of which gained passporting rights across the EU.

Other companies have continued expanding through the MiCA framework. BitPay, for example, recently received authorization from the Dutch Authority for the Financial Markets (AFM), allowing it to offer regulated cryptocurrency payments and stablecoin services across eligible European markets.

Meanwhile, ESMA has shifted its focus beyond licensing by reviewing the operational resilience of authorized crypto custodians, including their key management, custody controls, incident response procedures, and third-party risk management.

For Hungary, the repeal removes the final domestic obstacle that separated its market from the broader European licensing system.

Industry observers believe the updated Hungary crypto regulation could encourage exchanges and fintech firms to restore services, reduce compliance costs, and improve access to regulated digital asset products for Hungarian consumers. Rather than maintaining a parallel national framework, the country is now placing its confidence in MiCA as the primary rulebook governing cryptocurrency activity across the European Union.

As a result, Hungary crypto regulation has shifted from being one of Europe’s toughest enforcement models to one that embraces regulatory harmonization—offering greater legal certainty for both investors and crypto businesses operating within the EU.