Australia's Crypto Rules Test Innovation vs. Investor Protection Balance

Australia has moved to integrate cryptocurrency regulation into its traditional financial framework, marking a pivotal shift in the sector’s legal landscape. On 25 September 2025, the federal government released draft legislation requiring cryptocurrency exchanges, fintechs, and digital asset platforms to adhere to financial services standards akin to banks and insurers. The policy, announced by Assistant Treasurer Daniel Mulino, mandates compliance with governance, capital, and consumer protection obligations under the Corporations Act. This move aims to address long-standing regulatory ambiguity while preserving innovation, a key concern for industry stakeholders.

The draft legislation introduces two primary regulatory categories: (covering trading and exchange services) and (for asset storage). Operators must obtain an Australian Financial Services Licence (AFSL), which imposes minimum capital reserves, client asset segregation, and robust cybersecurity frameworks. Stablecoins, specifically, fall under a new “stored-value facility” regime overseen by the Australian Prudential Regulation Authority (APRA), aligning them with traditional financial products. For smaller operators—defined as those handling less than AUD 5,000 per customer or facilitating under AUD 10 million in annual transactions—simplified compliance exemptions apply.

Penalties for non-compliance are stringent, with fines reaching up to AUD 16.5 million or 10% of annual turnover. These measures aim to deter misconduct and ensure accountability, particularly after the collapse of global platforms like FTX, which left Australian investors vulnerable. The legislation also mandates transparency in transaction settlement, conflict-of-interest management, and dispute resolution processes.

Industry reactions have been cautiously optimistic. Kraken’s Australian managing director, Jonathon Miller, praised the policy for reducing “debanking” risks—a persistent challenge for crypto platforms seeking traditional banking access. Coinstash co-founder Mena Theodorou emphasized the need for tailored regulations, warning against “copying traditional finance rules onto a new industry”. Zerocap’s Jonathan de Wet highlighted the balance required between consumer protection and fostering innovation.

Globally, Australia’s approach mirrors Singapore’s integration of crypto into existing financial laws but includes unique exemptions for small-scale operators. The policy positions Australia to compete with regulatory hubs like the EU (under MiCA), the UK, and the UAE, while avoiding the fragmented U.S. landscape. Analysts suggest this framework could attract institutional investment and solidify Australia’s role as a regional crypto hub.

The draft, open for public consultation until 24 October 2025, reflects a broader push to align with global standards while addressing domestic needs. Final legislation is expected in 2026, with rollout timelines remaining flexible. For businesses, early compliance preparation is critical to navigating the new regime.

Source: [1] title4 (https://digitaloneagency.com.au/australias-draft-crypto-regulation-legislation-what-it-means-for-exchanges-vasps-and-the-future-of-digital-assets/) [2] title5 (https://www.smartcompany.com.au/technology/crypto-regulation-coming-australia-exchanges-bank-like-rules/)