Australia’s ASIC to Regulate Crypto Exchanges Under New Consumer Protection Laws: A Comprehensive Breakdown
In a landmark move for the nation's digital asset sector, the Australian government has introduced its first comprehensive regulatory framework for cryptocurrency exchanges and custody platforms. The Corporations Amendment (Digital Assets Framework) Bill 2025, tabled by Treasurer Jim Chalmers and Financial Services Minister Daniel Mulino, aims to close what the government describes as dangerous regulatory gaps that have left billions in client assets unprotected. This legislation, which could unlock an estimated $24 billion in annual productivity gains, signals a new era of oversight and consumer protection for Australia's crypto industry.
Closing the Regulatory Gap: The Genesis of the Digital Assets Framework Bill
The bill was introduced and read a first time in Parliament on Wednesday, with the second reading—a procedural step where Parliament debates the bill's general principles—moved the same day. This legislative action represents the culmination of years of discussion and consultation on how to best integrate digital assets into Australia's existing financial regulatory structure.
In a joint statement, Treasurer Jim Chalmers and Financial Services Minister Daniel Mulino articulated the government's position: "We take Australia's crypto industry seriously, and we know that blockchain and digital assets present big opportunities for our economy, our financial sector, and our businesses." The primary driver for the bill is the protection of consumer assets held by third-party platforms, a concern magnified by high-profile international exchange failures that highlighted the risks of unregulated custody.
This initiative follows the Australian Securities and Investments Commission's (ASIC) October update to Info Sheet 225, which provided new guidance on custody, fund management, and yield products. That update signaled that tokens and stablecoins would likely be treated as financial products under existing law, setting the stage for this more formal and expansive legislative framework.
Deconstructing the Bill: Two New Financial Product Categories
The core of the Corporations Amendment (Digital Assets Framework) Bill 2025 is the creation of two distinct financial product categories under the Corporations Act. This bifurcation acknowledges the different functions and risk profiles within the digital asset ecosystem.
1. Digital Asset Platforms This category encompasses facilities where operators hold clients' crypto assets and provide transactional functions. This includes a wide range of services that are central to the user experience on most centralized exchanges, such as:
- Transferring digital assets.
- Buying and selling crypto.
- Staking assets to support blockchain networks.
Essentially, any platform that acts as a custodian for a user's cryptocurrency while also enabling them to trade or interact with it falls under this definition.
2. Tokenised Custody Platforms This second category is tailored for platforms handling real-world assets (RWAs) that have been tokenized. This involves assets like bonds, property, and commodities. Under the proposed law, licensed operators of these platforms must hold each underlying asset and issue a single redeemable token that clients can exchange for the original asset. This creates a direct link between the digital token and the physical or financial asset it represents, aiming to ensure full backing and redeemability.
The Licensing Mandate: AFSL and Stringent Operational Standards
For platforms falling under these new categories, obtaining an Australian Financial Services Licence (AFSL) will become mandatory. This is a significant hurdle that aligns crypto service providers with traditional financial institutions. The licensing requirement brings with it a suite of obligations designed to protect consumers and ensure market integrity.
Licensees will be required to:
- Act “efficiently, honestly and fairly.”
- Adhere to ASIC’s custody and settlement standards. These standards govern critical operational areas, including:
- How client assets are safeguarded.
- The execution of trades.
- The handling of client instructions.
- The sourcing of liquidity.
Failure to comply with these standards will not be taken lightly. The legislation imposes multimillion-dollar penalties on firms that fail to protect client assets, underscoring the government's serious intent.
Small-Scale Exemptions: Fostering Innovation Without Overburdening Startups
Recognizing that a one-size-fits-all approach could stifle innovation, the bill includes explicit exemptions for smaller operators. Platforms are exempt from the full licensing requirements if they meet both of the following thresholds:
- Hold less than $5,000 per customer.
- Facilitate under $10 million in total annual volume.
This provision is designed to protect genuinely small and lower-risk platforms from the significant compliance costs associated with a full AFSL. James Volpe, founding director of Melbourne-based Web3 education firm uCubed, described this as “early stage experimentation without forcing every proof of concept to go through the process of becoming licensed from day one." This approach allows nascent projects and startups to develop and test their models in a live environment without immediate regulatory overhead, potentially encouraging continued innovation within the Australian ecosystem.
Industry Reaction: Cautious Optimism Amid Unanswered Questions
The introduction of the bill has been met with a mixture of approval and cautious concern from industry experts. While there is broad consensus that regulation is a necessary step forward for legitimacy and consumer safety, several key questions about implementation remain unresolved.
Darcy Allen, an Associate Professor at RMIT University and a director at the Digital Economy Council of Australia, pointed to a significant strategic challenge. “The real issue is that after years of delay, Australia must realize it is now a follower on digital-asset regulation,” Allen told Decrypt. He noted that other jurisdictions, such as the European Union with its MiCA framework and Hong Kong with its detailed licensing regime, have already moved ahead with clearer and more established regulatory systems. This puts Australian operators at a potential competitive disadvantage and means the local framework is playing catch-up in a global market.
Allen also highlighted that the industry still has “genuine questions about how these changes will work in practice,” including how regulatory discretionary powers will be exercised and what the final cost of compliance will be for Australian operators.
Echoing these concerns, Joni Pirovich, founder and CEO of crypto specialist master agent The Crystal aOS, told Decrypt that while the bill moves in the right direction, it still leaves significant gaps. Pirovich stated that the “definitional detail” isn’t where it needs to be, indicating that key terms and scope may require further clarification. She added that the industry will now need to lobby major parties and independents for more holistic reform that also delivers on other critical issues, most notably tax clarity for digital asset transactions.
Strategic Conclusion: A Foundation for Growth Amid Global Competition
The Corporations Amendment (Digital Assets Framework) Bill 2025 marks a pivotal moment for cryptocurrency in Australia. By bringing exchanges and custody services under the formal oversight of ASIC, the government is taking decisive steps to mitigate consumer risk and instill greater confidence in the digital asset market. The creation of two new product categories demonstrates a nuanced understanding of the sector's diversity, while the small-scale exemptions show a desire not to smother innovation in its early stages.
However, this is clearly a beginning, not an end point. As experts have noted, Australia is entering a global regulatory race from behind. The success of this framework will depend heavily on its final implementation details, the cost and efficiency of the licensing process, and its ability to provide certainty without being overly restrictive.
For readers and market participants, what comes next is critical. The industry's lobbying efforts for tax clarity and refined definitions will be a key area to watch as the bill progresses through Parliament. Furthermore, how existing major international exchanges operating in Australia adapt to these new requirements—and whether they choose to pursue an AFSL or restrict services—will be a major indicator of the framework's practical impact. This legislation lays a necessary foundation, but its ultimate success will be measured by how effectively it protects consumers while allowing the Australian crypto industry to compete and thrive on the world stage.