Australia has long had a reputation as a technologically savvy nation and a high adoption of digital finance. Still, it has also lagged in offering precise and cohesive regulation for its fast-evolving crypto sector. That may change soon. The Australian government has released a draft bill, an exposure draft of the Treasury Laws Amendment (Regulating Digital Assets and Tokenised Custody, Platforms) Bill 2025, that seeks to bring crypto exchanges, custodial services and tokenised platforms under the ambit of Australia’s financial services laws.
At its core, this initiative aims to bring clarity for businesses, protection for consumers and legitimacy for digital asset markets in Australia. But the proposed changes are not merely cosmetic: they could upset the way crypto firms are operated, the way in which users access services, and how Australia competes with other countries around the world.
What is Proposed in the Draft Legislation
The draft bill aims to amend the Corporations Act 2001 with the express purpose of capturing ‘digital asset platforms’ and ‘tokenised custody platforms’ as financial products or services. Under the proposed regime, any platform that holds or controls digital tokens on behalf of clients would be required to hold an Australian Financial Services Licence (AFSL). Operators would have to comply with new requirements such as asset holding, transactional and settlement protocols, platform rules, and disclosure requirements.
One of the key aims is to close the regulatory gaps. Currently, a large number of crypto providers are just required to register with AUSTRAC (the financial intelligence agency) for anti-money laundering (AML) and counter terrorism financing (CTF) requirements. Under the new legislation, exchanges and custodial services would be subject to oversight by ASIC in the area of their conduct, including risk controls, conflicts of interest and client funds. There are proposed exemptions for platforms of low value or less risk, and transitional arrangements for existing operators to comply.
The government also introduces “targeted exemptions” to prevent overregulation of infrastructure or automated smart contracts that do not hold client funds. The bill distinguishes between the asset or token itself (which does or does not qualify as a financial product) and the service of custody or trading on behalf of others. The legislation is also intended to parallel the international frameworks and to reflect moves in Europe, Singapore, Hong Kong and the UK.
Why This Is Important to the Crypto Industry
For crypto firms that are currently operating in a somewhat grey area, this reform is more of an opportunity than a challenge. On one hand, the application of a coherent regulatory regime is conducive to the attraction of institutional capital, consumer confidence and better business models. Many in the industry have welcomed the concept of “license and operate” rather than never knowing what the future holds.
On the other hand, the requirements may put heavy loads on smaller players. Compliance, legal costs, audit controls and capital requirements could deter smaller or purely local operators. Some platforms may decide to leave the market or move if they are unable to scale up and meet the new thresholds.
Financial advisers and wealth managers could also come out of the woodwork under this regime. Until now, many advisers in Australia couldn’t even offer or recommend crypto assets due to legal ambiguity. With these reforms, advisers may have a regulated route to allow for more comprehensive integration of crypto into portfolios. Meanwhile, retail users might benefit from increased protections on conduct, fund segregation and dispute processes.
Impacts on Users and Consumer Protection
For the everyday users, the proposed framework promises greater transparency and recourse. Platforms will need to publish clear “platform guides” which detail risks, fees and operational rules. If a platform misuses client assets or does not adhere to conduct rules, ASIC can enforce sanctions such as penalties and license suspension.
In practice, this may mean that users could start to see more robust segregation of funds, improved auditing practices, and stricter due diligence on exchanges. The reforms aim to reduce the risk of “rug pulls,” fraud, and misappropriation that have plagued some parts of the crypto space globally.
However, these protections come at a cost: Tighter requirements are often slow, add more verification steps, and inhibit edge innovations. The balance between regulation and flexibility will decide how seamless the experience will be.
A Global Perspective and the Way Forward
Australia’s draft legislation comes amid a global shift toward crypto regulation, which in some regions has led to fragmentation. While certain jurisdictions have adopted stricter approaches, others are experimenting with sandbox models. In earlier discussions, some observers predicted that Australia would move more slowly than its peers, suggesting that regulation was still a year away. This cautious pace has occasionally stifled local innovation, as some firms chose to relocate to more permissive markets..
With this new draft, Australia is signalling that it no longer wishes to lag. The timing of consultation (open until October 2025) suggests a rush to get rules completed within the next legislative cycle. That means public feedback, industry adjustments and back-the-scenes lobbying will all play a critical role.
Importantly, whether the final framework in Australia supports innovation without smothering it will depend on the implementation. Exemptions, proportionality, agility in changing rules and clarity in their enforcement will separate rules that stunt growth from the regulations that promote it.
Probable Sector Disruption and Strategic Shifts
In the months and years ahead, change across parts of Australia’s crypto market can be expected. Exchanges will probably work in partnership with banks or custodians or develop in-house custody systems to comply. Some global players can leverage their scale and block out smaller players. Others may prefer to focus on non-custodial solutions or decentralised solutions to avoid licensing if at all possible.
Issuers of tokens, particularly those that are building utility, lending, and staking features, will have to rethink their models vis-à-vis disclosure, liability and risk assumptions. Platforms that provide staking, collateralization or wrapped token services may be moved into the regulated scope or exempted expressly under certain conditions.
Financial services firms that previously couldn’t touch crypto may enter with renewed vigour: Asset managers, custodial banks and technology providers will see business opportunities. Compliance, infrastructure, secure custody, auditing and governance firms could see more demand.
Users may initially experience friction, slower onboarding, more verification, and fewer “wild west” options. However, over time, the industry may level off, mature, and attract more traditional capital and institutional participants.
Challenges, Trade-Offs and Risk Points
No regulation is risk-free. One significant trade-off is that more oversight can discourage innovation, particularly in new areas such as decentralised finance (DeFi), governance tokens, or new protocol experiments. If the burden of compliance is too heavy, innovation could move offshore again.
Enforcement and resource limitations could also compromise the regime. ASIC and Treasury will require capacity, specialist expertise and cross-collaboration with law enforcement and international agencies. Without adequate oversight, rules on paper won’t translate into safer markets.
Another risk is regulatory arbitrage. Firms may re-document services to avoid custody, or they may adopt decentralised or non-custodial models to avoid licensing. The balance between what is under control and what is decentralised will require clarity.
Finally, in the transition period, uncertainty may have a chilling effect on investment. Projects may run behind schedule, capital may be hesitant and users may be in a wait-and-see mode. That might slow down growth in the short term, even as the long-term clarity is intended to increase confidence.