Hungary is taking steps to establish a comprehensive regulatory framework for cryptocurrencies, with the aim of enabling local banks to directly offer digital assets to their customers. The proposed legislation, drafted by the Ministry of National Economy (NGM), comes as the European Union's Markets in Crypto Assets (MiCA) regulation is set to take effect in 2024.

The draft law, released earlier this month, seeks to regulate the future tradability of "digital investment instruments," which includes cryptocurrencies. The proposal outlines two key objectives:

1. Incorporation of crypto services by traditional financial institutions: Under the proposed regulations, domestic banks in Hungary would be able to directly offer and facilitate cryptocurrency trading for their customers.

2. Regulatory oversight by the Hungarian National Bank (MNB): The draft law designates the MNB as the domestic supervisory authority for overseeing crypto asset trading within the country. However, the MNB's role would not extend to regulating the Bitcoin market itself, but rather focus on the domestic trading of tokens and other digital assets. If implemented, the regulations are scheduled to take effect starting June 30, 2024.

Hungary's CBDC Exploration

While Hungary has previously stated that there is no urgent need for a widely available central bank digital currency (CBDC), the country is actively exploring the potential benefits and use cases of such a digital currency.

Anikó Szombati, the Chief Digital Officer of the MNB, has expressed Hungary's interest in remaining at the forefront of CBDC research. She highlighted that the consideration of a CBDC should be driven by either addressing severe market failures or achieving strong policy objectives.

One potential incentive for a CBDC in Hungary could be promoting financial inclusion, as approximately 13% of Hungarian adults currently do not have bank accounts. In June 2023, the MNB collaborated with banking services firm Perfinal to launch the first live retail CBDC pilot project in the European Union.

As the crypto landscape continues to evolve, Hungary's proposed regulations aim to strike a balance between fostering innovation and ensuring oversight within the digital asset sector.