Australia’s Draft Legislation Could Require Bitcoin Exchanges to Hold Australian Financial Services Licences

• New licences: digital asset platform and tokenized custody platform under the Corporations Act.

• Exchanges registered with AUSTRAC will also need AFSL-level registration with ASIC for regulated financial products.

• Penalties up to A$16.5 million; exemptions for small, low-risk platforms holding < A$5,000 per customer or < A$10M annual turnover.

Australia draft crypto legislation: new licences for exchanges and custody platforms, stronger rules and penalties; read how this affects exchanges and users — latest update.

Australia has released draft legislation to create new crypto products, bringing the crypto companies under the same rules as financial services businesses.

Australia is aiming to tighten regulations around crypto service providers, with draft legislation that would extend finance sector laws to crypto exchanges.

Assistant Treasurer Daniel Mulino told a crypto conference on Thursday local time that the legislation is “the cornerstone of our digital asset roadmap,” which the Albanese Government released in March.

“This is a preliminary version of the legislation, and we are seeking stakeholder feedback on its effectiveness and clarity before proceeding further,” he said.

Currently, crypto exchanges that simply facilitate trading assets like Bitcoin (BTC) need only register with the Australian Transaction Reports and Analysis Centre (AUSTRAC), which has reported 400 crypto exchanges registered on its books, many of which are inactive.

What is Australia’s draft crypto legislation?

Australia’s draft crypto legislation proposes two new financial product categories — a digital asset platform and a tokenized custody platform — that bring selected crypto activities into the Corporations Act and require AFSL-level oversight. The draft aims to standardize custody, settlement and conduct rules for regulated platforms.

How will the draft law affect crypto exchanges and custodians?

The draft will require platforms offering regulated financial products to hold an Australian Financial Services Licence and register with ASIC. Platforms that currently only register with AUSTRAC will face new licensing, custody and reporting standards designed to reduce consumer risk.

Treasury notes breaches could attract penalties up to A$16.5 million, or three times the benefit obtained, or 10% of annual turnover — whichever is greater. Small, low-risk platforms holding under A$5,000 per customer or under A$10 million annual turnover are exempt.

Why are regulators proposing these changes?

Regulators say failures of digital asset businesses have shown gaps in custody and client protections. The draft targets risky conduct — including wrapped tokens, public token infrastructure and staking — and seeks to “legitimise the good actors and shut out the bad,” according to Daniel Mulino.

The framework seeks to align consumer protections with traditional financial services while preserving space for non-financial crypto activity and innovation.

When do these changes take effect and what’s next?

This is an exposure draft released for consultation; Treasury is seeking stakeholder feedback before finalising the law. A consultation period will determine timing and operational details for AFSL requirements and exemptions.

Frequently Asked Questions

Will all crypto issuers be regulated under the draft law?

No. The legislation focuses on platforms and custody services offering financial products. It does not aim to impose new rules on crypto issuers or token creators using crypto for non-financial purposes.

How large is the current AUSTRAC-registered exchange population?

AUSTRAC reports roughly 400 crypto exchanges registered, many of which are inactive. The draft law would create an AFSL-based registration stream with ASIC for those providing regulated products.

Key Takeaways

• Licensing shift: Digital asset and tokenized custody platforms will be captured by the Corporations Act and need AFSL-level compliance.
• Consumer safeguards: New custody and settlement standards aim to reduce asset loss and operator misconduct.
• Penalties and exemptions: Heavy penalties for breaches; clear exemptions for smaller, low-risk platforms to reduce undue burden.

Conclusion

The draft legislation marks a major step in Australia’s crypto policy, aligning digital asset platforms with financial services rules to boost consumer protection and market integrity. Stakeholders should review the exposure draft, assess AFSL readiness and submit feedback during consultation to shape final rules.

Published by COINOTAG. Last updated: 2025-09-25.