Australia Proposes Crypto Exchange Licensing Rules

The draft legislation, unveiled for public consultation, seeks to amend the Corporations Act 2001 to formally recognize two new categories of financial products: “digital asset platforms” (DAPs) and “tokenized custody platforms” (TCPs). This reclassification is the core mechanism through which the Australian government intends to bring crypto intermediaries under the purview of the Australian Securities and Investments Commission (ASIC). Financial Services Minister Daniel Mulino emphasized that the framework’s primary focus is not on the digital assets themselves, such as BTC or ETH, but on the businesses that custody these assets on behalf of clients. This targeted approach is a direct response to the “major losses for consumers” resulting from the high-profile failures of crypto intermediaries both in Australia and globally.

By categorizing these platforms as financial products, the legislation automatically subjects them to the existing suite of obligations faced by traditional financial intermediaries. This includes stringent licensing requirements, robust operational conduct rules, and enhanced consumer safeguards. The Treasury has explicitly stated that the framework is designed to account for the unique characteristics of digital assets, including their issuance, storage, and settlement processes. This move signifies a deliberate effort to integrate the crypto economy into the mainstream financial regulatory perimeter, moving beyond the current regime where exchanges are only obligated to comply with anti-money laundering and know-your-customer rules.

To enforce compliance, the draft bill outlines significant penalties for regulatory breaches. Fines can reach up to 16.5 million Australian dollars (approximately $10.8 million), or three times the benefit gained from the violation, or 10% of the entity’s annual turnover—whichever figure is greatest. This tiered penalty structure is intended to act as a powerful deterrent against misconduct. However, recognizing the need for proportionality, the proposal includes an exemption for smaller, “low-risk” operators. Entities that hold under A$5,000 per customer and process less than A$10 million in annual transactions will not be required to obtain a license, thereby reducing the regulatory burden on nascent businesses.

If enacted, ASIC will become the primary regulator responsible for the licensing and ongoing supervision of DAPs and TCPs. This would effectively bring crypto venues, brokerages, and platforms handling tokenized assets into regulatory alignment with traditional investment portfolio operators. The announcement comes shortly after ASIC provided a class exemption allowing licensed intermediaries to distribute stablecoins without needing separate approvals, indicating a coordinated effort to build a comprehensive regulatory architecture for digital assets. The consolidation of oversight under ASIC is expected to provide greater clarity and consistency for market participants.

The proposed framework specifically addresses modern crypto activities like staking, the use of wrapped tokens, and public token infrastructure, signaling a nuanced understanding of the ecosystem. For platforms dealing with a range of assets, from SOL to MATIC, the new rules mean adapting to a more formalized compliance environment. The requirement to hold an Australian financial services license will necessitate significant investments in governance, risk management, and client asset protection protocols. While this may increase operational costs, it is positioned by the Treasury as a necessary step to foster consumer trust and market integrity.

Public consultation on the draft legislation is open until October 24, 2025, providing the industry with a substantial window to provide feedback and shape the final rules. This extended timeline underscores the complexity of the undertaking and the government’s intention to deliberate carefully. The outcome of this process will determine the final shape of a regulatory regime that aims to protect consumers without stifling innovation, setting a critical precedent for how a major economy integrates digital assets into its financial system.