Hungary's Finance Ministry: Cryptocurrencies Aren't a Legal Payment Method

  • Hungary's Finance Ministry has recently revealed it's working on cryptocurrency regulations.
  • Per the country's government, cryptos like bitcoin aren't seen as a legal payment method.

Hungary’s Finance Ministry has recently revealed the country is working on a regulatory framework for cryptocurrencies like bitcoin, although it doesn’t yet consider them a legal payment method.

According to local news outlet Portfolio (restricted access), the government has set up a working group that includes Hungary’s central bank, the Finance Ministry, and the tax authority to draft potential cryptocurrency regulations.

These are set to look into the legal and economic implications cryptocurrencies have. Per local news outlet FintechZone, which summarized the Finance Ministry’s position, this is seen as a complex task because cryptocurrencies may be used to launder money or finance terrorism.

Other risks, the post reads, include cybercrime and “consumer protection issues,” presumably because most people don’t understand cryptocurrencies. As CryptoGlobe covered, a survey in the UK found that 38% of those who invest in cryptocurrencies don’t understand them.

The Finance Ministry reportedly argued:

Under applicable domestic regulations, it can be clearly stated that cryptocurrencies are not considered a means of payment or electronic money, a financial instrument or a cash substitute.

Hungary's Finance Ministry (summarized)

The Ministry further noted the European Union (EU) has already started working on cryptocurrency regulations, and added to them late last year when most cryptocurrencies were close to their all-time highs by working to closely monitor the industry, especially when it comes to anti-money laundering (AML) checks on crypto exchanges. 

Per the news outlet, the Ministry revealed that while this was a first step to regulate the nascent industry, cryptocurrencies “still require further steps to be taken.”  Notably, Hungary’s tax laws heavily tax cryptocurrency proceeds with contributions that can go up to 22% for health contributions, and 15% as personal income tax.

As CryptoGlobe covered other countries have been adopting not-so-friendly cryptocurrency regulations. Saudi Arabian regulators recently reaffirmed cryptocurrency trading is strictly forbidden in the country, as no parties are authorized to offer crypto-related services.

On the other hand, however, the Bank of Thailand (BoT), the country’s central bank, has recently revealed local banks are allowed to open subsidiaries to invest in cryptocurrencies. Meanwhile, in the US, the Securities and Exchange Commission (SEC) set September 30 as the deadline for its decision regarding the VanEck-SolidX bitcoin ETF.

Note: Some sentences in this article were translated.

OneCoin Denies Being a ‘Hybrid Ponzi-Pyramid Scheme’

The controversial OneCoin organization has recently responded to the Central Bank of Samoa, claiming it isn’t a “hybrid ponzi-pyramid scheme” as it doesn’t fir the definition of these schemes, and that it is a centralized, closed cryptocurrency.

According to the Samoa Observer, the Central Bank of Samoa claimed OneCoin is a “hybrid ponzi-pyramid scheme” that “laundered money through New Zealand to Samoa.” It also claimed the organization was targeting local residents through churches.

The organization, widely believed to be running a pyramid scheme using the cryptocurrency space, sent a statement to the Observer defending itself, claiming it’s neither a pyramid nor a Ponzi scheme. It’s worth noting individuals associated with OneCoin have been arrested and charged in various countries, including China and India.

In its response, OneCoin argued that Ponzi schemes see the revenue of old investors be “generated through the investment of new investors,” and that it doesn’t require its agents, known as Independent Marketing Associates (IMAs), to recruit others in order to earn bonuses.

Its defense revolves around IMAs not being “obliged to incur any additional expenses or recruit a new IMA,” and that they are rewarded for the “value of [their] sales,” not for recruiting new agents.

The organization added pyramid scheme regulations are these for “consumer protection,” and that its IMAs aren’t consumers. This, as when they join the organization they sign a contract classifying them as “self-employed business owners.”

The users which are part of the OneLife Network are NOT consumers. They are IMAs, meaning they are self-employed business owners.

As CoinDesk notes, OneCoin argues it isn’t a pyramid scheme because its agents aren’t seen as consumers and, as such, it can’t be classified under a dictionary definition of a pyramid scheme, and doesn’t force its IMAs to recruit new agents, although they’re incentivized to do so.

OneCoin, instead, argue it is a “centralized, closed cryptocurrency” with strict anti-money laundering (AML) and know-your-customer (KYC) rules, which make it “much more compliant than decentralized [cryptocurrencies].”

As reported, OneCoin’s leaders Ruja Ignatova and Konstantin Ignatov were recently indicted by the U.S. Attorney for the Southern District of New York (SDNY) on charges of wire fraud, securities fraud, and money laundering. Konstantin was arrested in March of this year.

Moreover, earlier this month former OneCoin investor Christine Grablis filed a lawsuit against the organization’s promoters, with Grablis’ attorney claiming OneCoin’s founders created a multi-billion dollar ‘cryptocurrency’ company based completely on lies and deceit.”