Hungary is in the launch phase. In a unique strategy, the Magyar Nemzeti Bank (Hungary’s central bank) created what it describes as a pilot that allows Hungarian students to use a CBDC. The Magyar Nemzeti Bank stated that “thousands of students have used the Student Safe mobile app and have answered more than one million quizzes.” Therefore, much like the case in China, the use of the term “pilot” should be taken with a grain of salt given real people are making real transactions with the CBDC. Therefore, Hungary is considered to be in the launch phase.

CBDC History and Development

In 2021, the Magyar Nemzeti Bank published a book titled, “At the Dawn of a New Age – Money in the 21st Century.” In the central bank’s words, it “intends to join the leading central banks in the field of central bank digital currency research, the first step of which is to publish a comprehensive study volume.” The book summarizes “the theoretical considerations, the most important practical issues, the motives behind the potential creation of this new instrument and the opportunities offered by this new form of money. The study volume is also unique internationally, as in addition to the conceptual and design considerations of the possible forms of central bank digital currency, it also covers their monetary policy, financial stability, and cash flow effects, as well as the issues of infrastructural implementation.”

In 2023, the Magyar Nemzeti Bank launched a joint initiative with the Money Compass Foundation to create “the first central bank digital currency pilot project in the European Union available to retail users.” Although the program was initially launched in 2020 as “MNB Digital Student Safe,” it was later rebranded as the “Student Safe mobile app” and reformatted as a CBDC. The CBDC is available to Hungarian students and their parents. The app can be downloaded from both the Apple store and the Google Play store.

The goal of the Student Safe project is to “improve young people’s financial literacy and to strengthen digital financial inclusion.” For example, children gain access not only to digital currency, but also quizzes on finance, digitalization, and sustainability. By successfully answering quizzes, students receive vouchers. Magyar Nemzeti Bank digital officer Anikó Szombati said, “This is a live pilot, which actually targets the future users of CBDC.”

Later in 2023, Magyar Nemzeti Bank digital officer Anikó Szombati clarified that “For the moment we don't see any imminent need for large-scale retail CBDC to be introduced.” Szombati added, “In considering CBDC, you first have to identify your motivation based on either severe market failure or a very strong policy objective.”

Human Rights and Civil Liberties Concerns

Hungary earned a 66 out of 100 in Freedom House’s 2023 Freedom in the World report. The ability to abuse a CBDC directly is debatable because the CBDC that would be used in Hungary would be provided by the European Central Bank—representing the European Union. With that said, when it comes to the issuance or use of a CBDC, the most relevant issues are the use of surveillance technology and the persistence of government corruption.

Reports have emerged that the government used advanced spyware to surveil journalists, lawyers, businesses, and politicians. The Hungarian Civil Liberties Union sued the government in a lawsuit that alleged “that the government’s use of the high-tech spyware constituted illegal secret surveillance and violated fundamental rights.” However, it was later found that no law had been broken. As the U.S. Department of State noted, “Legal experts noted that the country’s national security laws made it relatively easy for the justice minister to authorize surveillance activities against private citizens not suspected of criminal activity.” Unfortunately, a CBDC could be used to greatly expand surveillance by putting financial records on government databases by default.

“Corruption remains a problem in Hungary, and instances of high-level government corruption have not been properly investigated,” according to Freedom House. Furthermore, it was reported that, “Prosecutors have also been reluctant to investigate long-standing allegations of the misuse of public development funds disbursed by the European Union (EU), despite the severity of the problem.” The existence of pervasive corruption is a major concern with CBDCs because it calls into question any promises that might be made by the government to limit surveillance, control, or other risks of CBDCs. Furthermore, the existence of corruption calls into question whether CBDC policies might be designed to exert political favoritism through subsidies, price controls, or other targeted restrictions.

For additional information on concerns regarding violations of human rights and civil liberties, see the following reports by Amnesty International, Financial Tyranny Index, Freedom House, Human Rights Watch, Privacy International, and the U.S. Department of State. For additional information on concerns regarding the risks of CBDCs, see the following webpage and report by the Cato Institute: The Risks of CBDCs and Central Bank Digital Currency: Assessing the Risks and Dispelling the Myths.

For additional information regarding metrics, the methodology page explains each of the data points and provides their respective sources.