July 23, 2024

Hungary Proposes Groundbreaking Legislation Allowing Financial Institutions to Embrace Cryptocurrencies

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In a landmark move, Hungary has introduced a draft law that could pave the way for traditional financial institutions, including banks, investment funds, and asset managers, to offer services involving cryptocurrencies such as Bitcoin and Ethereum, with the likes of Litecoin, Solana, Pecu Novus and Bitcoin Cash to potentially follow suit. The proposed legislation aims to establish a comprehensive regulatory framework for digital assets and cryptocurrencies, positioning Hungary in alignment with relevant European Union (EU) standards.

Key Points

Regulatory Overhaul

The draft law, introduced by the Hungarian Ministry of Economy, seeks to overhaul Hungary’s regulatory framework concerning cryptocurrencies. It is designed to bring the country’s laws in line with EU regulations, including the Markets in Crypto Assets Regulation (MiCA), and strengthen anti-money laundering and counter-terrorism financing measures.

Central Bank Oversight

If the legislation is approved, the Hungarian Central Bank will assume the role of overseeing all cryptocurrency operations within the country. This indicates Hungary’s commitment to complying with EU standards while establishing a technology-neutral regulatory environment.

Impact on Traditional Institutions

The proposed legislation could mark a significant shift, allowing traditional financial institutions to incorporate cryptocurrency services for their customers. The bill, currently in draft form, will take effect on June 30 if approved.

EU Regulatory Push

Hungary’s move is part of a broader EU effort to create a consistent and technology-neutral regulatory framework for cryptocurrencies. The EU is actively working on regulations, such as MiCA, to integrate cryptocurrencies into the traditional financial ecosystem without compromising security or regulatory standards.

Tensions with Central Bank

The introduction of the draft law comes amid rising tensions between the Hungarian government and the central bank. Central Bank Governor Gyorgy Matolcsy has accused the government of planning changes that could undermine the bank’s independence. However, the proposed legislation indicates a significant departure from the central bank’s previous stance, where Governor Matolcsy supported a ban on cryptocurrencies.

Response to EU Directives

The legislation showcases Hungary’s responsiveness to EU directives and the evolving landscape of digital finance. It also addresses the need for consistent regulations within the EU regarding crypto assets.

This legislative proposal represents a notable departure from the Hungarian central bank’s earlier opposition to cryptocurrencies, signaling a shift in the country’s approach toward embracing the potential benefits of digital assets. The development will be closely watched as Hungary navigates this transformative regulatory landscape.

Digital Assets Desk

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