Hungary Adopts Comprehensive Crypto-Asset Regulation
On Wednesday, April 10, 2024, Hungary’s parliament adopted a new law regulating the crypto-asset market in the country. The legislation aims to align Hungary’s framework with European Union regulations on crypto-assets and markets in crypto-assets (MiCA) while ensuring consumer protection, financial stability, and innovation.
The law covers the issuance, offering, and trading of crypto-assets like bitcoin and ethereum. It also governs the supervision and potential sanctions for crypto-asset service providers like exchanges. Under the regulations, crypto-assets are split into three categories: electronic money tokens that maintain value tied to legal currencies, asset-referenced tokens with stable value linked to other assets, and other crypto-assets that do not fall under the first two definitions.
The National Bank of Hungary, also known as the Magyar Nemzeti Bank, has been designated as the competent authority responsible for overseeing crypto-asset market activities and enforcing rules. It has an extensive toolbox of corrective measures available if any legal violations or threats to consumers, investors, or financial stability are identified. This includes issuing warnings, imposing fines, suspending operations, ordering changes to be made, and restricting or removing online information.
To finance the new regulatory framework, the law establishes a supervisory fee applicable to crypto-asset service providers. The fee structure takes into account type of services and scale of operations. If a provider is already regulated as a credit institution, investment firm, or investment fund manager, they will pay according to existing industry regulations. Additionally, only banks and electronic money institutions can now issue, offer, or trade electronic money tokens after notifying regulators. Asset-referenced tokens and other crypto-assets have separate issuance rules as well.
The legislation also aims to improve customer protections and dispute resolution. Crypto-asset service providers must institute complaint management policies and appoint a consumer protection officer. Customers can submit complaints both verbally and in writing for recording and response within mandated timeframes. They are entitled to transcripts or copies of phone complaints free of cost.
In addition to enacting crypto-asset oversight, the new law amends several others related to financial sectors such as payments, collective investments and consumer protection to align with the introduced definitions and regulatory framework. It also grants authorities to the government and central bank to develop further associated criteria and customer protection rules over time. Most provisions will take effect on June 30, 2024, with transitional arrangements for existing market participants to transition smoothly by January 1, 2025.
