ICO in Hungary refers to a procedure through which businesses and persons involved in cryptocurrency activities can raise capital for their business ventures. ICO defines initial coin offering, the procedure through which a company can raise its capital through the issuance of tokens (which are virtual currencies).
Such tokens are sold to investors, who, in return, will obtain various financial advantages, as agreed in the contract between the company and the buyers. Given that in Hungary the legal framework regarding this matter is constantly evolving, we recommend you address to our team of consultants, who can help you open a Hungarian company that deals with ICO activities.
The incorporation of a company that will develop ICO or crypto activities follows the standard registration requirements available in Hungary (reserving a trading name, selecting a Hungarian legal entity, signing the incorporation documents, obtaining a tax registration number, etc.).
Many crypto business incorporated here are registered as private companies, the main options being the private company limited by shares (Zrt.) or the limited liability company (Kft.).
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Current law on ICO in Hungary
The legislation on ICO in Hungary covers 2 main categories of ICOs: 1) ICOs which are considered securities, and 2) ICOs which are not considered securities.
For the 1st category, there is a legal framework that provides very clear procedures, but for the 2nd, there are fewer rules, as there isn’t a distinctive legislation regulating it. Rules referring to ICOs are established by the National Bank of Hungary.
| Quick Facts | |
|---|---|
| What is ICO? | ICO stands for initial coin offering (ICO), a subcategory of initial public offering (IPO), which is used for crowfunding purposes through cryptocurrency. |
|
Types of ICOs |
There are 2 types of ICO – securities and non-securities ICOs. |
|
ICO law |
ICO in Hungary is regulated by the Hungarian Civil Code, Regulation EU No. 596/2014, Act VII of 2024 on Markets in Crypto Assets. |
| Company registration for ICOs (yes/no) | Yes |
| Minimum company registration requirements |
It is necessary to incorporate a legal entity, establish its seat in Hungary, open a corporate bank account, register for taxation and pay taxes as per the Hungarian law, etc. |
| Types of companies recommended for ICO investors |
A business developing ICO in Hungary can take the form of 2 private companies – the limited liability company or the company limited by shares. |
| Main regulator of the industry |
ICO in Hungary is regulated by the Hungarian Central Bank. |
| Legislation applicable to ICOs considered securities |
The Hungarian Civil Code, the Capital Markets Act. |
| Tax rate |
15% |
| Obligation to publish the prospectus (yes/no) | Yes |
| What is a prospectus? |
A corporate official document which provides all the necessary information on an investment based on public offering. |
| Deadline to publish the prospectus |
10 or 20 days, based on the ICO category. |
| How long does it take to obtain an approval in Hungary? |
Minium 2 and up to 3 months. |
| Know-Your-Customer / Anti-Money Laundering laws (yes/no) |
Yes, but exemptions can apply based on the nature of the ICO. |
| Entities to which the Anti-Money Launder Act applies | Financial services entities, credit institutions, mutual insurance funds, fiduciary managers, etc. |
The institution has stipulated that the ICO nature is recognized as a type of crowdfunding activity as long as there is a repayment method involved for those who have bought the respective tokens, including the general public. As to the 2 types of ICOs that can be developed in Hungary, it is necessary to know that for the non-securities ICOs, investors have to complete fewer procedures.
Where ICOs are considered securities, numerous procedures have to be observed; our team of consultants in company registration in Hungary can advise on these issues.
Legislation for securities ICO in Hungary
Many rules of law have to be observed for ICOs which are considered securities. Investors who want to open a company in Hungary (such as a startup business) by raising capital through ICOs should be aware of the following:
- issuers are required to publish their prospectus on the official website of the company if the value of the securities is of less than EUR 1 million within 12 months at an EU level (for publicly traded securities);
- exemptions are applied, such as in the case of offering of money market instruments with a maturity of less than 12 months;
- a prospectus can be approved in a period of 20 days in the case of first time trading of securities and in 10 days in other cases;
- however, one should expect to conclude all approval procedures in a period of 2-3 months;
- securities sold on regulated markets have to comply with the rules of the Market Abuse Regulation (Regulation EU No. 596/2014).
The Hungarian law on crypto assets
ICOs are part of the cryptocurrency system and laws, therefore the legislation applicable to cryptocurrency operators can also apply to ICOs. The Hungarian legislation on cryptocurrency has recently been modified, through the adoption of the Act of Markets in Crypto Assets.
Thus, investors interested in starting the process of Hungarian company formation in this field must be aware of the main regulations of the new law, which transposes into the national law the EU legislation. Some of the highlights of the new legislation are presented in the list below:
- the Hungarian parliament adopted the new crypto law on 17th of April 2024;
- the new law is known as the Act VII of 2024 on Markets in Crypto Assets;
- the legislation has recently entered into force, on 30th of June 2024;
- the Act introduces 25 new measures to be enforced by the Hungarian National Bank;
- in the case of those who were already operating a crypto-related activity (with certain exceptions, mentioned by the law) at the moment when the Act entered into force, the law stipulates that they need to comply with the new requirements no later than 1st of January 2025.
What is the purpose of the new crypto law in Hungary?
The new legislation aims at 3 main pillars. Our specialists in company registration in Hungary mention below the main aspects covered by the law:
- the issuance of cryptocurrency, the offering to the public of crypto assets, the procedure to be admitted to trading cryptocurrencies;
- the manner in which cryptocurrency services are provided to various parties on the territory of this country;
- the supervision activities carried out by the competent authorities (which, in these cases, refers to the Hungarian National Bank).
The Act does not cover only the requirements of those who want to open a company in Hungary developing crypto operations, but also the implication of individuals in this type of activity. For instance, the new law stipulates that natural persons providing crypto-assets services and advice must have the necessary experience and education in this field.
The law also enforces new measures concerning the protection of customers, but also certain obligations for service providers, who must register the complaints of their clients (regardless of how they are made – e-mail, telephone, in writing, etc.) for a period of 5 years.
What are securities in Hungary?
For those who want to open a Hungarian company developing ICO activities that are considered securities, it is necessary to know that the definition of this term can be found in the Hungarian Civil Code. Thus, securities are defined by the following 3 elements:
- legal statements that can be issued as paper-based documents or dematerialized documents;
- documents which contain the mandatory information recognized by the Capital Market Act;
- the rights granted by such legal statements can be exercised only through the respective statements.
Please mind that the rules of the Known-Your-Customer and Anti Money Laundering can apply based on the nature of the ICOs issued by the company; our consultants in company formation in Hungary can further advise on this matter.
We also invite you to address our accountants in Hungary if you plan to operate an ICO/crypto company here and you need assistance on the financial and reporting obligations your business must complete. Please contact our specialists, who can provide more details on ICO in Hungary and how to open a Hungarian company operating in this industry.