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 upon the contract between the company and the buyers.
Given that in Hungary the legal framework regarding this matter is still developing, we recommend you to address to our team of consultants, who can help you open a Hungarian company that deals with ICO activities.
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What is the current law on ICO in Hungary?
The legislation on ICO in Hungary is still underdeveloped in some aspects. Currently, there are 2 main categories when we refer to 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.
The institution has stipulated that the ICO nature is recognized as a type of crowdfunding activity as long as there is a repayment 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 as the field is highly unregulated.
Where ICOs are considered securities, numerous procedures have to be observed; our team of consultants in company registration in Hungarycan advise on these issues.
What is the law 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 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).
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.
Currently, these apply to a list of 13 types of institutions/companies; our consultants in company formation in Hungary can further advise on this matter.
Please contact our specialists, who can provide more details on ICO in Hungary and how to open a Hungarian company operating in this industry.