Hungary Repeals National Crypto Validation Rules, Ends Prison Risk for Certain Conversions

Hungary has rolled back a national crypto “validation” framework and the related criminal provisions that had exposed users and service providers to prison sentences of up to eight years. The Hungarian Parliament on July 31 approved Act XXXVIII of 2026 on the Repeal of Certain Statutory Provisions Concerning CryptoAsset Conversion Services. The law entered into force on Aug. 7, scrapping the mandatory domestic validation process for crypto-to-fiat and crypto-to-crypto conversions and deleting two criminal offences linked to that system. Under the now-repealed regime, certain conversions were required to pass through licensed, state-approved validators. Validators were tasked with checking the origin of funds, wallet or device ownership, customer identity and profiles, and screening transactions against external databases. Lawyers had warned that conversions executed without a validator certificate could be deemed unauthorized and potentially criminal under Hungary's Criminal Code (Act C of 2012). Two offences removed - "Abuse of crypto assets": Covered exchanges of crypto of significant value carried out via an unauthorized exchange service. Penalties ran up to two years for basic cases, escalating with transaction size and reaching up to five years in particularly serious cases. - "Unauthorized cryptoasset exchange service provision": Targeted providers conducting high-value exchange activity without the national validation certificate. Basic cases carried up to three years' imprisonment, rising to as much as eight years in the most serious cases. Why the rules drew backlash Introduced in 2025, the regime added a separate national compliance layer on top of incoming EU rules and disrupted the market. Exchanges faced a state validation requirement even when authorized elsewhere in the EU, raising questions about compatibility with the EU's Markets in Crypto-Assets Regulation (MiCA). The rules were followed by service pullbacks and exits: Revolut suspended crypto services in Hungary, and some firms weighed moving operations to other EU hubs such as Estonia or Lithuania. Local estimates at the time put Hungary's active crypto participants at roughly 500,000. Political and regulatory backdrop The repeal follows a political shift after Hungary's April 2026 parliamentary election and a government pledge to unwind measures viewed as excessive under the previous administration. Government spokeswoman Anita Kobol and newly appointed Minister of Innovation and Technology Zoltán Tanács said the earlier framework was excessive and politically motivated. Hungary also came under EU scrutiny. The European Commission opened an investigation into whether the validation requirement conflicted with MiCA and EU internal market rules. CMS Budapest partner Katalin Horváth said the Hungarian system duplicated protections already covered by MiCA and was incompatible with the single market. Impact on MiCA-authorized firms With the national validation layer removed, firms authorized under MiCA no longer need to route covered Hungarian conversions through separate Hungarian validators. András Gaál of Schoenherr noted that converting crypto without prior validation had previously been treated as an unauthorized transaction under criminal law. The shift comes after MiCA's transition period ended on July 1, 2026. ESMA has recently expanded its register, adding 57 firms to bring the total to about 300, which provides passporting rights across the EU. Newly listed or authorized firms cited include Standard Chartered, FalconX and BitPay, with BitPay receiving Dutch MiCA authorization to operate across eligible EU markets. EU-level oversight is also tightening. ESMA has begun reviewing the operational resilience of MiCA-authorized custodians, focusing on custody controls, key management and incident response. What operators are being advised to do Industry lawyers say payment institutions, crypto-asset service providers and intermediaries that had built workflows around Hungarian validators should unwind those processes and rely on EU MiCA-compliant authorization and passporting where applicable. Bottom line Hungary's repeal removes a national overlay that had criminalized certain crypto conversions and complicated compliance for providers serving Hungarian customers. The change restores reliance on the EU-wide MiCA framework and reduces legal uncertainty for exchanges and users, ending a period marked by domestic disruption and EU scrutiny.