Hungary aligns crypto-asset regulation with EU rules and enhances consumer protection

According to the new law, which is in line with EU Regulation 2023/1114 on markets in crypto-assets (MiCA), crypto-assets are divided into three categories: electronic money tokens, asset-referenced tokens and other crypto-assets. Electronic money tokens are crypto-assets that maintain a stable value by referring to a legal currency. Asset-referenced tokens are crypto-assets that maintain a stable value by referring to any other value or right, or a combination thereof, including one or more official currencies of a country. Other crypto-assets are crypto-assets that do not fall into the previous two categories.

The new law designates the National Bank of Hungary (Magyar Nemzeti Bank; "MNB"), the central bank and financial supervisory authority of Hungary, as the competent authority for overseeing the crypto-asset market and enforcing the rules and sanctions established by the European regulation and the new law. The MNB has a wide range of powers and measures to intervene in case of legal violations or direct threats to the interests of consumers, investors or the financial system, such as issuing warnings, imposing fines, suspending or prohibiting activities, ordering corrections or transfers, and restricting or removing online content.

To cover the costs of the supervision and regulation of the crypto-asset market, the new law imposes a supervisory fee on crypto-asset service providers, which consists of a base fee and a variable fee, depending on the type and scope of the crypto-asset service. If the crypto-asset service is provided by a credit institution, investment firm or investment fund manager, the supervisory fee is paid according to the respective laws governing those entities. In addition, the new law stipulates that electronic money tokens can only be issued, offered or traded by credit institutions or electronic money issuing institutions that have sent the crypto-asset white paper to the MNB in accordance with the EU regulation and made it public. Asset-referenced tokens can be issued, offered or traded by legal entities that comply with the requirements of the EU regulation on crypto-asset markets. Other crypto-assets can be issued, offered or traded by legal entities that comply with the requirements of the EU regulation on crypto-asset markets, but with less stringent rules.

The new law introduces provisions regulating the procedure for handling complaints by crypto-asset service providers. Customers can submit complaints verbally or in writing, and the crypto-asset service providers must record, preserve and respond to them within a specified timeframe. Customers also have the right to access the recordings of their phone complaints and to receive a certified transcript or a copy of the recording free of charge. Moreover, crypto-asset service providers must appoint a contact person responsible for consumer protection matters. These provisions are intended to ensure that customers have access to effective and transparent dispute resolution mechanisms in case of any problem with the service by crypto-asset service providers.

The new law also amends other Hungarian laws related to the financial sector, such as those on credit institutions, investment firms, collective investment schemes, payment services and consumer protection, to accommodate the new rules and definitions on crypto-assets and crypto-asset services.

In addition, the new law authorises the Hungarian Government to establish detailed criteria for evaluating the knowledge and professional experience required for providing advice on crypto-assets. It also authorises the President of the MNB to establish detailed rules for the information provided to customers before entering into a contract, during the contractual relationship and upon its termination, as well as the form and method of handling customer complaints.

The new law will enter into force on 30 June 2024. However, for the existing crypto-asset service providers that issue crypto-assets other than asset-referenced tokens or electronic money tokens, the new law provides transitional provisions to ensure a smooth transition to the new regulatory framework and to avoid any disruption to the existing crypto-asset market. These providers must comply with the requirements of the EU regulation by 1 January 2025.

authors: Gábor Pázsitka, Noémi Csiki