Hungary is formally decriminalizing cryptocurrency trading, effectively dismantling a punitive regulatory framework that imposed prison sentences for specific digital asset transactions. Tisza government spokesperson Anita Köböl confirmed at a Thursday press conference that the administration will unwind rules introduced in 2025 which mandated approved validation for crypto-to-fiat and crypto-to-crypto conversions. This policy reversal directly addresses the severe contraction in domestic trading activity and the subsequent suspension of services by major digital asset platforms, including Revolut, which cited the unworkable compliance environment as the primary driver for their exit. Köböl characterized the previous legislation as unnecessary, noting that it rendered practical operations impossible while instilling fear among market participants and negatively impacting several hundred thousand individuals.

The regulatory overreach stemmed from a legislative package passed in 2025 that amended Hungary's Criminal Code and Act VII of 2024 on the crypto market, collectively known as the Crypto Act. These amendments, which took effect on July 1, 2025, established a rigid approval system where exchanging crypto assets was permissible only with a compliance certificate issued by an authorized crypto asset conversion validation service provider. Transactions conducted without this certificate were legally classified as 'unauthorised crypto-transactions,' rendering linked asset transfers invalid and devoid of legal effect. Data compiled by Woofun AI indicates that this framework created a significant bottleneck, as the requirement for external validation halted the flow of capital and forced users into a legal gray area where standard financial activities carried criminal risk.

Under the now-repealed regime, the state created a new entity class, the crypto conversion validation service provider, which required explicit authorization from Hungary's Supervisory Authority of Regulated Activities. These providers were tasked with rigorous due diligence, including checking the origin of crypto assets, identifying wallet or device ownership, assessing user profiles, and verifying transactions against external databases before issuing the necessary compliance certificates. The penalties for non-compliance were severe and tiered based on transaction volume. Individuals or entities exchanging crypto worth between 5 million Hungarian forint and 50 million forint, approximately $16,000 to $160,000, faced up to two years in prison. Penalties escalated to five years for transactions between 50 million forint and 500 million forint, with sentences reaching up to eight years for transactions exceeding 500 million forint.

The decision to reverse these measures follows intense scrutiny from the European Union, which launched a probe to determine whether Hungary's restrictions were compatible with the bloc's broader digital asset rules. Woofun AI notes that the EU investigation served as a critical catalyst, highlighting the incompatibility of Hungary's criminalization approach with the single market principles governing cross-border digital finance. The regulatory friction had already strained diplomatic relations, creating a focal point of policy maneuvering between Budapest and Brussels. The new administration views the repeal as essential to resolving these tensions and aligning national law with European standards, thereby removing the legal uncertainty that had paralyzed the sector.

This policy shift marks a definitive break from the 2025 crypto framework established under the previous administration, which exposed both users and service providers to criminal liability for routine financial activities. The reversal coincides with the political transition following Hungary's April 12 parliamentary election, which ended the 16-year rule of nationalist Prime Minister Viktor Orban. Peter Magyar's pro-European Tisza Party has assumed power with a mandate to ease years of conflict between Hungary and the EU. By dismantling the restrictive approval system, the new government aims to restore confidence in the financial ecosystem and encourage the return of suspended platforms. Woofun AI analysis suggests that this legislative correction will likely trigger a rapid rebound in trading volumes as legal barriers are removed and the threat of incarceration is eliminated for the estimated hundreds of thousands of affected citizens.