Australia’s government has released draft legislation that would require cryptocurrency exchanges and custody providers to hold an Australian Financial Services Licence (AFSL), bringing major parts of the crypto industry squarely under existing financial services laws. The exposure draft, published by Treasury, creates two new categories, “digital asset platforms” and “tokenised custody platforms”, and proposes that they be treated as financial products that must meet AFSL obligations.
The move forms part of a broader package that the government refers to as its efforts to develop an “innovative Australian digital asset” framework. Officials say the changes aim to close regulatory gaps, improve consumer protections and reduce risks such as unauthorised custody, market misconduct and opaque product offerings. The draft also outlines conduct and governance standards, potential designation powers for systemic-risk products, and significant penalties for non-compliance.
Regulators have been preparing the ground: the Australian Securities and Investments Commission (ASIC) has updated guidance and signalled that many digital-asset services will likely require AFSL-level oversight, while AUSTRAC still mandates registration for digital currency exchange providers under anti-money-laundering rules. Together, these regulatory steps aim to align licensing, AML and custody expectations across agencies.
Industry reaction has been broadly constructive, with major exchanges and local operators welcoming clarity while urging the government to balance consumer protection with innovation-friendly, proportionate rules. Legal and advisory firms note that the proposals are a significant step toward legal certainty that could encourage institutional participation, but they warn of compliance costs and implementation timelines that smaller platforms may find challenging.
The government has opened the draft for consultation, seeking feedback from industry, consumer groups and regulators before finalising the bill. If adopted as drafted, the law would mark one of Australia’s most comprehensive attempts to fold crypto intermediaries into traditional financial services frameworks, a trend mirrored in other jurisdictions seeking to tame risks while harnessing digital asset opportunities.
FAQs
Q: Who will need a licence under the draft law?
A: The exposure draft targets operators of “digital asset platforms” and “tokenised custody platforms”, essentially exchanges and custody services that facilitate buying, selling, custody or tokenisation of digital assets, requiring them to hold an AFSL if the services fall within the financial-product definitions.
Q: Does this replace AUSTRAC registration?
A: No. AUSTRAC registration for digital currency exchange providers remains a separate anti-money-laundering requirement; the draft complements AML rules by adding AFSL-level conduct and custody obligations administered by ASIC.
Q: What are the expected penalties for non-compliance?
A: Draft materials and government commentary indicate significant fines and enforcement options consistent with the Corporations Act framework (including large monetary penalties and potential deregistration), though exact figures and thresholds will depend on the final bill.
Q: How can industry respond to the draft?
A: Treasury’s consultation process is open to submissions from exchanges, custodians, consumer groups and legal advisers. Stakeholders can propose changes, suggest carve-outs for smaller operators, or request phased compliance timelines.
