DeFi protocol frontend in Hungary

VASP Registration: Under the transposition of the EU's 5th and 6th Anti-Money Laundering Directives (AMLD5/AMLD6), custodial wallet providers are classified as Virtual Asset Service Providers (VASPs).

Obligation: VASPs, including those offering custodial services, are required to register with, or be licensed by, the Hungarian Financial Supervisory Authority (primarily the Magyar Nemzeti Bank - MNB, the Central Bank of Hungary, which oversees financial market supervision) for AML/CTF purposes.

Purpose of Registration: This registration primarily obliges the entity to comply with AML/CTF requirements, such as customer due diligence (KYC), transaction monitoring, and suspicious activity reporting, rather than specific operational custody rules.

Act CXXXVI of 2013 on the prevention and combating of money laundering and terrorist financing (Pmtv.) – This is Hungary's primary AML law, amended to include virtual asset service providers.

Authorization as a CASP: Under MiCA, any entity providing "custody and administration of crypto-assets on behalf of third parties" will be classified as a Crypto-Asset Service Provider (CASP) and will require prior authorization by a national competent authority (in Hungary, this will be the MNB).

Scope: This authorization is comprehensive and covers specific operational, organizational, and prudential requirements, going far beyond mere AML registration.

Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (MiCA).

Keep client crypto-assets and funds separate from their own crypto-assets and funds.

Maintain records and accounts that allow for the immediate segregation of client crypto-assets and funds from own assets and from those of other clients.

Return client crypto-assets and funds without undue delay upon their request.

Issuing warnings against unlicensed service providers (often foreign entities).

Providing guidance and requiring registration for Virtual Asset Service Providers (VASPs) under AML rules.

Entity Targeted: Xifra Lifestyle (also known as Xifra Global, Xifra LLC). Violation Type: Unlicensed financial service provision (offering investment services related to cryptocurrency trading without the necessary MNB authorization) and operating a scheme with characteristics of a pyramid scheme. Penalty Amount: The MNB issued a public warning and a cease-and-desist order. While no specific administrative fine amount was publicly disclosed by the MNB in its initial announcement, the action effectively prohibited the entity from operating in Hungary and referred the case to law enforcement for potential criminal proceedings.

Outcome: The MNB prohibited Xifra Lifestyle from offering its services to Hungarian residents. The MNB also filed a criminal complaint against the unknown perpetrators. The platform subsequently largely ceased operations in Hungary.

MNB Warnings: The MNB often issues general warnings to consumers about the risks of crypto, or specific warnings about unlicensed foreign entities, without a formal "fine" or "penalty amount" attached, but these are crucial in protecting consumers and maintaining market integrity.

Tax Authority (NAV): The National Tax and Customs Administration (NAV) enforces tax laws on crypto income and transactions, but these are typically individual or corporate audits and assessments rather than publicly announced "enforcement actions" against specific crypto platforms with a universal "penalty."

Regulator Name: Magyar Nemzeti Bank (MNB - Hungarian National Bank)