This is how the Hungarian government is overregulating the crypto sector

on October 30, 2025 that decision comes into effectthat fundamentally transforms the regulation of cryptocurrency exchange services in Hungary. The aim of the legislation is to make the market more transparent and to combat abuses. However, due to the strictness of the conditions, many experts fear that smaller, innovative players will simply be pushed out of the market.

The decree that the Hungarian crypto community has been waiting for has seen the light of day, and the twist in the whole matter is that it will come into effect on October 30, 2025, that is, in two days. The decree concerns the validation of crypto-asset exchange services and apparently imposes extremely strict conditions on those who want to carry out this type of activity in a business manner in Hungary. The aim is apparently to clean up the market, but in fact the regulations almost hermetically exclude all smaller, independent or innovative players. Anyone who is not a bank, or at least a bank-level company, should not even dream of operating legally.

“To validate or not to validate” is the question here

Paragraph 1 of the decision lists the cases in which no validation required. You do not need a permit if: activity is not business related or it is not up for consideration (e.g. a friendly crypto exchange), if it is not regular, if it is conducted by a secret service or law enforcement agency, or if someone is conducting the exchange themselves, e.g. moving their money between their own wallets.

They are also exempt from it decentralized (DeFi) solutionsas long as they really operate on the basis of a smart contract. This includes, for example, bridging, liquidity pooling or a token swap via DEX. So the rule is: DEXs and DeFi mechanisms are exempt if they are truly decentralized. Centralized switching services, on the other hand, are subject to notification and authorization.

The exemption is therefore an illusion, since in reality 90% of the market consists of centralized exchanges and service providers, which in our small country therefore become subject to licensing overnight. With this step, the Hungarian regulations do not suppress the black market, but plow the market. Small and medium-sized players will simply not be able to bear the compliance burden.

80 million capital, ISO certificate and location security

Paragraph 2 of the decision sets out in detail the conditions that must be met by anyone wishing to act as a validating service provider. Based on the regulations only a legal entityso a corporation can be considered – sole proprietorships, DAOs and smaller startups can’t even kick the ball. The terms include at least HUF 80 million registered capitalsetting up a supervisory board and a board of directors, hiring an auditor, at least two specialists with legal, economic, IT or law enforcement qualifications, information security certificate (ISO27001 level compliance), at least three employees, site security certificate and annually Liability insurance of HUF 250 million. According to the regulation, the validation service provider must therefore have a compliance system at bank level – this practically excludes smaller, independent actors.

Of course, the service providers must provide a document so that the authorities can talk to them at all. They must provide, among other things, the founding document, employment contracts and copies of diplomas, information security documentation, AML, complaints management and conflict of interest regulations, proof of liability insurance, as well as moral certificates for managers and owners, together with Hungarian and foreign declarations. The authority fully examines the applicant’s personal, financial and IT background and continuously monitors compliance. Any changes must be reported within 8 days and the permit may be revoked if the conditions are violated or the activity is terminated.

Overregulation leads to migration

According to several members of the crypto community, the regulations impose disproportionately strict requirements and make it virtually impossible for smaller market players to operate. Although the aim is to protect against money laundering and fraud, in practice these regulations can strengthen market concentration – instead of domestic startups, only larger companies with an international background can survive. Experts also draw attention to the fact that regulations do not encourage true decentralization either: since most DeFi projects operate with semi-centralized elements, they may also be subject to licensing requirements, which creates legal uncertainty in the market.

More and more countries across Europe are trying to adapt the regulation of the crypto ecosystem to the MiCA framework, but thanks to the strictness of the Hungarian regulation, it is vastly exceeding even the EU’s expectations. The result can be summarized: Hungarian developers, startups and DeFi projects are fleeing abroad, because an Austrian, Estonian or Polish headquarters offers a much more relaxed and innovation-friendly environment.

The decree, which will come into effect on October 30, 2025, says one thing: Hungary is not asking for decentralized innovation. Rather than leading the crypto sector towards transparency, self-regulation and responsible action, it is erecting a bureaucratic wall for new actors. This decree does not increase security, but rather creates an obstacle to development – ​​but this is how we can stay one step ahead of the declining West.