Australia has approved its first full-scale legal framework for digital assets, marking a major turning point in the country’s approach to crypto oversight. The reform brings exchanges and custody providers much closer to the standards already applied across traditional finance, signaling that crypto platforms are no longer being treated as a lightly supervised edge case. Instead, they are being folded into the core machinery of financial regulation.
The legislation at the center of this shift is the Corporations Amendment (Digital Assets Framework) Bill 2025, which passed both houses of Parliament on April 1. Its central policy design is notable: rather than attempting to regulate every digital asset directly, lawmakers chose to target intermediaries that hold, control, or administer customer funds and assets. That approach reflects the risks exposed by previous industry collapses, especially where customer assets were commingled with company funds, misused, or trapped in insolvency proceedings.
By integrating covered crypto businesses into the Australian Financial Services Licence (AFSL) regime, Australia is effectively saying that firms handling client crypto should meet standards comparable to those required of brokers and fund managers. The practical effect is that operating a crypto platform will increasingly resemble operating a financial services business, with licensing, conduct, and operational obligations attached.
How the new law defines regulated crypto activity
The framework introduces two new regulated categories under the Corporations Act. The first is digital asset platforms, a category that covers crypto exchanges and similar services that hold digital assets on behalf of users. The second is tokenized custody platforms, which apply to firms that hold real-world assets and issue digital tokens representing those holdings. This captures an important part of the tokenization market, where off-chain assets are mirrored through on-chain instruments.
Operators in both categories must obtain an AFSL from the Australian Securities and Investments Commission (ASIC). Licensing comes with substantive obligations, not just registration. These include safeguarding client assets, maintaining adequate capital, providing clear disclosures, and participating in formal dispute resolution systems. In other words, the law aligns crypto intermediaries with the risk-control framework already expected in mainstream financial services.
Just as importantly, the framework is built around the idea that the most immediate regulatory risks often do not come from the existence of a token itself, but from the entities that sit between customers and their assets. That is why the law concentrates on custody and operational control. Policymakers are clearly responding to problems seen in prior industry failures, including asset commingling, misuse of customer funds, and bankruptcies in which customers were left unable to recover their holdings.
Exchanges and custodians will face tougher compliance standards
Before this reform, Australia’s crypto oversight was more fragmented. Many exchanges only needed to register with anti-money-laundering authorities unless the products they offered already fell within the legal definition of financial instruments. That created a gap in which platforms could hold substantial amounts of customer value without being subject to the full suite of financial services obligations applied elsewhere in the market.
The new regime is designed to close that gap. Covered platforms will now need to meet stricter operational and financial standards that are aligned with existing financial services laws. The legislation also gives the regulator broader authority to create more detailed rules on custody, governance, and risk management. Noncompliance may trigger civil penalties, which gives the framework stronger enforcement weight than a purely principles-based statement of intent.
At the same time, lawmakers have not applied the same burden to every participant in the ecosystem. Smaller and earlier-stage platforms are granted limited exemptions, preserving room for experimentation and innovation. Specifically, firms that hold less than A$5,000 per customer and process under A$10 million in annual transactions will not be subject to the full licensing requirements. This carve-out suggests Australia is trying to balance investor protection with the need to avoid shutting out emerging businesses before they scale.
Why this matters for Australia’s digital finance market
The new law may strengthen Australia’s ability to capture a larger share of the digital finance market. Regulatory uncertainty has long been one of the biggest barriers for large institutions, pension funds, and compliance-focused operators considering crypto exposure. A clearer licensing structure does not eliminate business risk, but it does provide firmer boundaries around what market participants are allowed to do and what standards they must meet.
The bill is now awaiting royal assent and is expected to take effect after a transition period. That transition window is important because it gives affected firms time to prepare license applications, update internal controls, and redesign custody and compliance processes where necessary. So while the legislative milestone is significant, the operational transformation will unfold over time rather than overnight.
The broader institutional context also matters. Australia’s pension fund Hostplus is exploring whether to offer Bitcoin and other digital assets to nearly two million members through its Choiceplus platform. If regulatory approval is granted and the final product design is completed, a rollout could begin as early as the next financial year. That development suggests digital assets are moving beyond specialist crypto venues and into discussions within large, mainstream capital pools.
Taken together, the reform sends two clear signals. First, regulators are prioritizing oversight of intermediaries that control customer assets. Second, raising compliance standards does not necessarily mean closing the door on innovation. Instead, Australia appears to be building a framework in which exchanges, custodians, tokenization firms, emerging startups, and institutional investors can all operate with clearer rules. In the coming years, competitive strength in the market may depend not only on liquidity and fees, but also on licensing status, governance quality, and the ability to protect client assets under a recognized regulatory structure.