Australia Aligns Crypto with Banks to Secure Trust and Innovation

Australia’s government has unveiled a draft legislative framework that will require cryptocurrency exchanges and custody platforms to obtain an Australian Financial Services License (AFSL), aligning the sector with traditional financial regulations. The proposed measures, announced by Assistant Treasurer Daniel Mulino on September 25, 2025, aim to enhance consumer protection, operational transparency, and market integrity while fostering innovation within a structured regulatory environment. The draft legislation, open for public consultation until October 24, 2025, signals a pivotal shift in Australia’s approach to digital assets, moving from a fragmented oversight model to a unified regulatory framework under the Corporations Act.

Under the new rules, digital asset platforms—defined as entities facilitating cryptocurrency trading, exchange, or transfers—and tokenized custody platforms, which safeguard client assets, will be subject to AFSL requirements. These licenses will impose obligations such as client fund segregation, robust cybersecurity protocols, and independent auditing. The legislation also mandates strict compliance for stablecoin issuers, requiring 1:1 collateral backing and transparency to mitigate risks of under-collateralization. Exemptions will apply to “small, low-risk” operators handling less than AUD 5,000 per customer or facilitating under AUD 10 million in annual transactions, ensuring proportionality for early-stage startups.

Penalties for non-compliance are severe, with fines reaching up to AUD 16.5 million, three times the benefit gained, or 10% of annual turnover—whichever is greater. These measures, designed to deter misconduct, underscore the government’s commitment to holding crypto operators to the same standards as banks and insurers. The draft also introduces mandatory governance and risk management frameworks, including minimum capital reserves and conflict-of-interest mitigation strategies.

Industry reactions have been largely positive, with major players like Kraken, Coinbase, and Swyftx welcoming the clarity. While some caution that excessive regulation could stifle innovation, many argue that the structured approach will attract institutional investment and bolster investor confidence. The legislation’s alignment with global frameworks, such as Singapore’s Payment Services Act, positions Australia to compete with emerging crypto hubs in the Asia-Pacific region.

The draft builds on years of regulatory evolution, including 2024-2025 policy papers and a 2022 token-mapping exercise. By embedding crypto within existing financial laws rather than creating a bespoke regime, the government seeks to balance innovation with investor protection. Final legislation is expected in 2026, with implementation timelines remaining flexible to accommodate stakeholder feedback.

The proposed framework reflects a global trend toward tightening crypto regulation, as seen in the EU’s Markets in Crypto-Assets (MiCA) and the U.S.’s fragmented but intensifying oversight. Australia’s approach, however, distinguishes itself through exemptions for small operators and a focus on integrating digital assets into traditional financial infrastructure. This strategy aims to foster a competitive, secure environment for both startups and institutional players, positioning Australia as a leader in regulated crypto markets.