Hungary to repeal jail terms for unlicensed crypto services

Hungary has moved to repeal a law that made some crypto-related activities punishable by prison and will replace criminal penalties with a regulatory framework for digital asset services, government officials announced.

The government plans to submit a bill to parliament that would remove criminal sanctions for operating crypto platforms, arranging token offerings or providing custody services without authorisation. Enforcement would shift from criminal courts to financial regulators and administrative measures.

Officials told lawmakers the legislation aims to clarify rules for businesses and investors by creating a clear licensing route for crypto service providers. Regulators would set registration rules, capital requirements, customer due diligence and standards for safeguarding client assets. Administrative fines, licence revocation and civil remedies are expected to replace prison sentences for regulatory breaches.

An opposition lawmaker argued the prior criminal rules had created legal uncertainty for startups and established companies, prompting some firms to relocate or halt expansion. A representative of a domestic crypto association welcomed the repeal as a step that would help restore investor confidence and make it easier for licensed exchanges and wallet providers to operate in Hungary.

Prosecutors and law-enforcement officials had defended the earlier criminal measures as a deterrent against fraud and loss in unregulated crypto operations. The government said it will keep the ability to investigate and prosecute intentional fraud, money laundering and other serious crimes connected to digital assets while removing criminal liability for licensing infractions.

Hungary’s revision follows calls from business groups and some MPs to align national law with European Union standards for digital assets, including the Markets in Crypto-Assets framework and existing anti-money-laundering obligations. Details of the replacement regime have not been finalised; government sources indicated the bill will specify licensing by the national financial supervisory authority, customer due diligence rules and capital thresholds.

Parliamentary committees will review the bill before a plenary vote. Lawmakers and industry groups are expected to debate the scope of licences, implementation timelines and transitional arrangements for firms that registered or operated under the earlier rules. If approved, secondary regulations and supervisory guidance will be developed to implement the new oversight arrangements.

Background: Hungary tightened penalties for some crypto activities during the previous parliamentary term, drawing criticism that the measures were overly broad for licensing breaches. Across the EU, governments are updating national rules to focus on licensing and prudential oversight while reserving criminal prosecution for deliberate wrongdoing.