Why Hungary's Crypto Ban May Not Be What It Seems

Forbes

3 days ago

Hungarian Prime Minister Viktor Orban addresses his opening speech of the 'Conference of Speakers of ... More the European Union Parliaments' in the parliament building in Budapest, Hungary, on May 12, 2025. The Conference of Speakers of European Union Parliaments is the highest forum for cooperation between European national parliaments, with the main function of defining the framework and strategic goals for interparliamentary cooperation. (Photo by Attila KISBENEDEK / AFP) (Photo by ATTILA KISBENEDEK/AFP via Getty Images)
Hungary's new cryptocurrency regulations have sparked panic across global crypto communities, with headlines screaming about prison sentences for bitcoin ownership and mass criminalization of digital assets. However, legal analysis around Hungary's crypto ban reveals a more nuanced reality where the July 1 legislation primarily targets unlicensed domestic exchanges rather than criminalizing everyday crypto trading.
Media Misunderstanding of Hungary's Crypto Ban Creates Panic
The widespread confusion stems from misinterpretation of Hungary's new Criminal Code sections 394/A and 408/A, which took effect July 1. While crypto Twitter exploded with warnings about blanket criminalization, legal experts argue the reality is far less dramatic.
"Hungary did not ban crypto — despite the scary headlines," explains crypto analyst Fefe Demeny, who consulted legal experts to understand the new regulations. The statutes don't outlaw Hungarian citizens holding bitcoin, running nodes, or trading on most international exchanges.
Instead, the legislation criminalizes two specific activities: intentionally using unvalidated Hungarian crypto exchanges and operating such exchanges without proper licensing. This distinction proves crucial for understanding the law's actual impact.
The Purported Target Of Hungary's Crypto Ban Is Domestic Shadow Markets
According to legal analysis comissioned by Demeny, the new regulations primarily target large-scale, shadow-market exchanges operating within Hungary rather than everyday crypto ownership. The law establishes specific criteria for determining whether a crypto provider "operates in Hungary":
"Most of the crypto exchanges do not fulfill any of the criteria listed above," Demeny notes. "They don't have offices, bank accounts, targeted marketing, .hu domains, or regular conference participation in Hungary."
Hungary Crypto Ban: International Platforms Remain Legal
This interpretation suggests that major international platforms like Coinbase, Kraken, and Binance remain accessible to Hungarian users, provided they don't actively target the Hungarian market. The legislation incorporates MiCA-style provisions stating that license requirements don't apply when Hungarian users access foreign exchanges on their own initiative.
Pajor Dávid, a lawyer quoted by Hungarian financial publication Pénzcentrum, confirmed this understanding: "The MiCA regulation framework is fundamentally guiding, with the validation requirement only applying to transactions above 5 million forints" (approximately $14,000).
Hungary Crypto Ban: Regulatory Vacuum Creates Uncertainty
However, a significant problem remains: nobody can actually obtain the required "validation" yet. The legislation promised detailed implementation regulations, but these remain on the ministry's to-do list. Without secondary legislation, prosecutors will struggle to prove which platforms "should have been validated."
"The detailed regulations and applicable procedures are still unknown, with the authority having 60 days to develop them," explain TaylorWessing legal experts. This regulatory vacuum means that while the law technically took effect July 1, practical enforcement faces significant obstacles.
Why Crypto Companies Are Still Suspending Services In Hungary
Despite legal arguments suggesting continued access to international platforms, major companies have taken cautious approaches. Revolut's suspension of Hungarian crypto services reflects corporate risk management rather than clear legal requirements.
Industry sources suggest companies prefer to avoid potential legal complications rather than test uncertain regulatory boundaries. The lack of clear implementation guidelines makes it difficult for businesses to ensure compliance, leading to preemptive service suspensions.
Market Participants Await For Regulatory Certainty after Hungary's Crypto Ban
The Hungarian crypto situation illustrates the challenges facing digital asset regulation in the EU as MiCA implementation varies across member states. While the legislation appears more targeted than initially reported, the lack of clear implementation guidelines continues to create uncertainty for businesses and users alike.
"Lawyers expect real-world cases only once those details land, likely in the autumn," Demeny concludes. "The new law aims at stopping large-scale, shadow-market exchanges inside Hungary, not at criminalizing everyday crypto ownership. For now."