Share Share Share Pin

The Australian government has unveiled a comprehensive plan to regulate cryptocurrency exchanges and custodians under the existing Australian Financial Services Licence (AFSL) framework. The proposal, presented in September 2025, aims to bring digital asset platforms and tokenized custody providers under the same regime that governs traditional financial services. Officials say the move will close regulatory gaps, protect consumers, and align Australia with global standards.

The announcement, led by Minister for Financial Services Daniel Mulino, marked a turning point in the country’s digital asset roadmap. While previous frameworks left large sections of the crypto industry outside mainstream financial oversight, the new draft legislation introduces clear definitions, licensing requirements, and enforcement powers.

Australia’s approach to digital assets has long been criticized for being fragmented. The government now intends to bring clarity by expanding the Corporations Act to include two new categories: Digital Asset Platforms (DAPs) and Tokenized Custody Platforms (TCPs). This shift means that crypto operators holding client assets will be treated like financial service providers.

For years, exchanges and custodians managed billions in client assets with minimal oversight. The new rules are designed to address the systemic risks of custody, leverage, and market integrity. By enforcing “same activity, same risk, same regulation,” authorities want to level the playing field between crypto firms and traditional finance.

Digital Asset Platforms are defined as businesses that hold tokens on behalf of clients and enable transactions such as transfers, staking, and market-making. They must act as custodians and settlement agents, making them critical nodes in the crypto ecosystem. Importantly, software-based wallets and decentralized applications that do not hold user funds remain outside the scope.

Under the new framework, DAP operators will face licensing, disclosure, and governance requirements. They must also ensure their systems are efficient, honest, and fair, with penalties for misconduct.

Tokenized Custody Platforms, meanwhile, issue tokens that represent claims on underlying assets, such as gold or fiat reserves. They also include services that provide wrapped or bridged assets across blockchains. This sector has grown rapidly, creating risks where backing assets are poorly managed or misrepresented.

TCP operators will be required to publish detailed disclosures, maintain verifiable reserves, and ensure redemption rights for holders. Stablecoin issuers are excluded from this regime, as they will fall under separate payments regulation, but wrapped assets and custody tokens must comply with AFSL standards.

The AFSL extension requires crypto platforms to comply with existing financial conduct standards. This includes consumer disclosures, operational audits, and governance rules. Penalties for violations can reach 16.5 million Australian dollars or ten percent of annual turnover.

The government also introduced a “low-risk” exemption. Platforms holding less than 5,000 AUD per client and handling under 10 million AUD annually will not need full licensing. This exemption aims to encourage innovation without burdening small startups.

Regulators will enforce minimum standards on settlement systems and custody arrangements. These will be overseen by the Australian Securities and Investments Commission (ASIC). Technical audits, resilience checks, and transaction monitoring will become part of the compliance process. This mirrors practices already in place for traditional exchanges.

Every operator must provide clients with a Platform Guide. Unlike standard product disclosure statements, these guides explain how platforms function, risks involved, fee structures, and client rights. This measure is designed to boost transparency and prevent information asymmetry.

Australia is not alone in reforming crypto oversight. The European Union has implemented MiCA (Markets in Crypto Assets), while the United States is strengthening stablecoin and custody laws. By aligning with these frameworks, Australia hopes to avoid regulatory arbitrage and provide certainty for international firms.

The reforms are expected to reshape the local crypto industry. Exchanges like Binance Australia and Independent Reserve will need to upgrade governance and compliance systems. Custody services, staking providers, and bridging platforms must assess whether their activities fall under the new definitions.

Some industry groups have welcomed the clarity, saying it will help legitimize digital assets and attract institutional investment. Others argue that heavy compliance costs could push smaller firms out of the market. Critics also warn that innovation in decentralized finance could be stifled if regulators overreach.

Nevertheless, the government insists that innovation must be balanced with consumer protection. Minister Mulino emphasized that regulatory gaps exposed Australian investors to unnecessary risks, citing recent collapses of international exchanges.

The exposure draft is open for consultation until late October 2025. Treasury will then refine the legislation based on industry feedback. Full implementation is expected in 2026, with a phased transition to allow businesses to adapt.

Observers note that while the final shape of the law may change, the direction is clear: Australia is moving to fully integrate crypto into its financial regulatory system.

Australia’s plan to bring crypto under AFSL rules signals a decisive shift toward stronger oversight. While challenges remain, the framework offers a structured path for exchanges and custodians. For readers interested in how other countries are responding to crypto regulation, Olam News provides in-depth coverage of global financial reforms and digital asset policies.

Subscribe to get the latest posts sent to your email.

Type your email…

Subscribe

ASICAustraliaBlockchainCrypto RegulationFinancial LicenseStablecoin