In November 2025, the Australian Treasurer and Minister for Financial Services formally submitted the Corporations Amendment (Digital Assets Framework) Bill 2025 (hereinafter referred to as the "Digital Assets Framework Bill") to the Federal Parliament, proposing to bring "digital asset platforms" and "tokenized custody platforms" under the scope of the Corporations Act. Specifically, it intends to rely on the Australian Financial Services License (AFSL) system to bring crypto trading and custody businesses under the full supervision of the Australian Securities and Investments Commission (ASIC). This article argues that this move reflects Australia's intention to supplement the regulatory system for crypto trading and custody businesses at the legislative level while maintaining the existing "current tax law treatment of crypto assets" approach. This signifies that Australia is moving further away from its previous bottom-line regulatory model towards a comprehensive financial regulatory model focused on platforms and custody. This article will start with Australia's existing tax and regulatory framework for crypto assets, systematically review the core content of the Digital Asset Framework Act and the shift in regulatory philosophy it reflects, and further assess the potential impact of this legislation on the compliance costs, business models, and cross-border operations of cryptocurrency exchanges and custody institutions operating in Australia, thus providing observations and references for crypto industry practitioners and researchers. 1. Australia's Existing Crypto Asset Regulatory Framework Before the Digital Asset Framework Act came into effect, Australia's regulatory system for crypto assets mainly consisted of three levels: tax regulation, anti-money laundering and counter-terrorist financing regulation (AML/CFT), and fragmented financial regulation. In terms of tax regulation, Australia generally does not enact new taxes specifically for cryptocurrencies, but rather prioritizes applying existing general tax laws to handle all crypto transactions. In 2021, the Australian Taxation Commission, in collaboration with several law firms, accounting firms, and other intermediaries, conducted a comprehensive review of the tax treatment of digital assets and related transactions in Australia, and produced an assessment report on the taxation of crypto transactions in 2024. The report concluded that existing Australian tax laws can generally resolve the taxation of crypto assets and related transactions. This view was subsequently endorsed by the Australian Treasury, which also believes that it is not appropriate to introduce specific tax legislation for cryptocurrencies at this stage. Therefore, while existing Australian tax law acknowledges the special nature of cryptocurrencies, it will not introduce a "crypto tax" or create large-scale special rules, but rather prefers to apply existing tax law rules. One of the key aspects of anti-money laundering and counter-terrorist financing (AML/CFT) regulation is... At the fragmented level of financial regulation, existing Australian law primarily uses the similarity between crypto businesses and traditional financial products as the main criterion for determining the applicability of financial regulatory laws: if a crypto asset essentially constitutes part of a security, derivative, or managed investment scheme, then the related issuance, trading, and advisory activities fall under the financial regulatory scope of the Australian Securities and Investments Commission (ASIC); conversely, for typical "pure cryptocurrencies" (such as Bitcoin and ETH), and trading platforms that do not involve derivatives, they are often not considered financial products or financial service providers and are not subject to relevant financial regulatory norms. In summary, prior to the enactment of the "Digital Asset Framework Bill," Australia had already established a preliminary multi-layered governance framework covering crypto assets through three dimensions: tax regulation, anti-money laundering and counter-terrorist financing regulation, and fragmented financial regulation. If the "Digital Asset Framework Bill" is ultimately passed, it will further unify the applicable legal standards in the crypto asset field and clarify regulatory boundaries and the obligations of stakeholders. 2. The Crypto Asset Trading Regulatory Framework Proposed by the "Digital Asset Framework Bill" The logic of the proposed Digital Asset Framework Bill can be summarized as follows: first, define the platform; then, treat the platform as a financial product; and finally, use the Australian Financial Services License (AFSL) to further regulate platform operators. Meanwhile, the bill also reflects many attributes tailored to the crypto industry. Specifically: First, it introduces two new types of financial products into the Companies Act: Digital Asset Platforms (DAPs) and Tokenized Custody Platforms (TCPs). A Digital Asset Platform (DAP) refers to a facility where an operator holds digital tokens on behalf of clients; typical examples are centralized cryptocurrency exchanges and custodial wallet services. The key to a Tokenized Custody Platform (TCP) lies in the "tokenization of real-world assets." Typically, the operator identifies an underlying asset (excluding currency), creates a digital token representing the right to deliver that asset, and holds the underlying asset in custody. For example, physical gold, real estate, or bonds can be used as the underlying asset, and corresponding tokens can be issued. Investors holding these tokens can redeem or instruct the delivery of the asset according to the agreement. By incorporating these two concepts into legal provisions, the bill systematically treats the business of holding digital and tokenized assets on behalf of clients as a whole as a financial product for the first time, rather than simply applying existing financial regulatory frameworks to it. As mentioned above, once digital asset platforms and tokenized custody platforms are recognized as financial products, then "providing financial services around such products" (including issuance, transaction matching, custody, and advice) will, in principle, require an Australian Financial Services License (AFSL). The Australian Treasury has explicitly stated that companies providing the aforementioned platform services must, in principle, obtain an Australian Financial Services License (AFSL) and be subject to financial regulation by the Australian Securities and Investments Commission (ASIC), with their basic obligations being consistent with those of traditional financial service providers. For CeFi exchanges and custody institutions, if the bill takes effect, they may need to align themselves with traditional regulated financial institutions in areas such as organizational structure, compliance departments, risk management, client asset segregation, information disclosure, and even dispute resolution. Furthermore, the Digital Asset Framework Act also reflects differentiated thinking in its institutional design. Specifically, the Act provides exemptions from the Australian Financial Services License (AFSL) requirements for digital asset platforms that pose only extremely low risk to customers. The exemptions apply to two categories of service providers: those whose "business falls into a low-value category (i.e., does not meet the prescribed financial threshold)" and those whose "services do not constitute an integral part of their business." The first category applies to digital asset platform operators, while the second applies to individuals providing services related to such platforms. The Act also stipulates that if a platform holds customer tokens and participates in staking and distributing returns on their behalf, it constitutes "custodial staking," falling within the scope of the platform's regulated business. However, if users control their private keys and participate in staking directly on-chain, it is considered "non-custodial staking" and is not subject to the Act's regulation. Furthermore, for "wrapped tokens" for which holders have redemption rights, the bill, in determining whether such tokens constitute financial products, ignores the existence of the redemption right itself and returns to their essential characteristic of representing assets or rights. At the operational level, the bill also confirms that open public blockchain infrastructures such as Bitcoin and Ethereum will not be directly classified as financial market infrastructure or financial products, thus avoiding imposing non-operational compliance obligations on the underlying open-source protocols. Additionally, if the Digital Assets Act is passed, there will be an 18-month transition period after the reforms begin. 3. The Direction of Crypto Asset Regulation in Australia as Reflected by the Bill's Enactment The introduction of the Digital Asset Framework Bill marks a new stage in Australian cryptocurrency regulation and reflects a significant shift in regulatory thinking over the past two to three years. Firstly, this is a breakthrough from scratch. As mentioned earlier, Australia previously lacked dedicated financial regulation for crypto trading platforms and custody, with regulatory focus primarily on basic areas such as anti-money laundering. This legislation, for the first time, incorporates crypto platforms into mainstream financial regulation, signifying that the government recognizes the need for the digital asset industry to be subject to the same rigorous oversight as traditional markets such as securities and derivatives. This shift is driven to some extent by international trends and risk events: Internationally, the EU's Crypto Asset Markets Regulation (MiCA) introduced in 2023, the US's increased enforcement of crypto exchanges, and the introduction of licensing systems in Asian financial centers like Singapore reflect a tightening global regulatory environment. Domestically in Australia, Australian investors have been deeply involved in the crypto market over the past few years, and the collapse of some cross-border exchanges (such as FTX) has impacted Australian users, prompting calls from the public and politicians for stronger domestic regulation. Therefore, the Australian government has chosen to follow this trend, strengthening regulation through legislation and adjusting its previous laissez-faire attitude. The new legislation sends a clear signal: Australia no longer views the crypto industry as a special zone outside the financial system, but is gradually incorporating it into the unified regulatory framework of the financial system. Secondly, the regulatory tone in Australia and other countries has shifted from observation and trial to proactive governance. Looking back at the Australian government's actions over the past two years, a gradual path emerges: From the end of 2022 to the beginning of 2023, the Australian Treasury conducted research and consultation on "Token Mapping." Token mapping involves categorizing the functions and legal attributes of various crypto tokens, assessing whether existing regulations cover these attributes, and identifying regulatory gaps. At the time, the government's stance was to first clarify "what to regulate" before deciding "how to regulate." The token mapping consultation report published in February 2023 is considered a foundational document for subsequent policies, suggesting which tokens might require legislative regulation and which could maintain their current status. Subsequently, in the second half of 2023, the Australian government drafted an initial regulatory framework for digital asset platforms (i.e., the draft "Regulation of Digital Assets and Tokenized Custody Platforms" bill published by the Australian Treasury in September 2025) and solicited opinions from the industry. After several months of refinement, it was finally formally submitted to Parliament in November 2025. These steps demonstrate that Australian regulators have clearly taken a step forward, moving from preliminary research to formal legislation. Especially after the Albanese government came to power in 2022, the market was initially worried that the new government would slow down the pace of crypto regulation proposed by the previous government. However, the actual process shows that the new government also recognizes the necessity of regulation and chooses to proceed steadily. The change from no regulations to regulations also sends a policy signal: Australia hopes to establish a credible governance framework in the field of digital asset regulation in order to better protect investors and attract compliant businesses. The Australian Treasury specifically emphasized that the legislation will "strengthen consumer protection, modernize the regulatory system, enhance confidence, and attract investment." It is clear that regulators are not trying to suppress the industry, but rather to seek a governance model that strikes a balance between protection and innovation. This trend is similar to that of many Western countries: embracing the economic opportunities brought by new technologies, but on the premise of setting up firewalls to prevent risks. Third, the new bill reflects a subtle adjustment in policy priorities. Compared to a few years ago when the Australian government focused on tax processing and combating illicit use, the current policy focus is shifting to the regulation of market institutions and investor protection. For example, early discussions focused more on how to tax crypto transactions and whether citizens were using crypto to evade taxes; while recent initiatives (including legislation requiring licensing and plans to strengthen the relationship between banks and the crypto industry) have focused on establishing a fair and orderly market. This shows a shift in the regulatory "weathervane": from viewing crypto as an emerging phenomenon and a niche speculative tool to recognizing it as part of the mainstream financial ecosystem requiring regular regulation. At the same time, the government's understanding of the crypto industry has become more comprehensive. For instance, the government launched research on central bank digital currencies (CBDCs), supported the Reserve Bank of Australia's pilot program for the digital Australian dollar (eAUD) in 2023, and plans to discuss launching a broader digital financial innovation pilot environment in 2025. These initiatives demonstrate that the Australian government is attempting to achieve a dynamic balance between regulatory constraints and support for innovation. On the one hand, it strictly controls crypto intermediaries; on the other hand, it reserves space and policy support for the application of new technologies (such as CBDCs and DeFi). It is foreseeable that future crypto regulation in Australia will no longer be a laissez-faire "vacuum zone," but will resemble traditional financial markets with well-established licensing management, risk monitoring, and international coordination mechanisms. At the same time, the government will proactively explore innovation to maintain its position in global fintech competition. Finally, the new regulatory framework echoes the international trend of crypto regulation. Especially in investor protection, Australia has drawn on the experiences of many other countries, such as requiring trading platforms to implement custodial segregation of client assets and introducing compensation schemes. This is similar to New York State's requirements for crypto custody or the reserve requirements in the European Crypto Asset Markets Regulation (MiCA). Australia's choice to integrate crypto services into the existing financial licensing system (rather than creating a completely new set of regulations) also reflects a convergence with the UK and Singapore—utilizing mature financial regulatory frameworks to regulate new assets, thereby ensuring regulatory consistency and cross-market collaboration. As the Financial Action Task Force (FATF) pushes for countries to implement the "travel rule" (requiring disclosure of information for encrypted transfers) and the G20 discusses global crypto regulatory guidelines, Australia's new legislation makes its domestic regulatory framework more aligned with international standards. For example, once the Australian Transaction Reporting and Analysis Centre (AUSTRAC) expands its regulatory scope from 2026, Australia will essentially meet the FATF's comprehensive regulatory requirements for Virtual Asset Service Providers (VASPs). Overall, Australia's regulatory stance has shifted from observer to active participant: proactively shaping rules through legislation and policy, rather than simply waiting for international consensus. This change will help Australia have a greater voice in the global digital asset governance dialogue and build its image as a "trustworthy and competitive digital asset innovation hub." 4. Impact of the Bill on Crypto Industry Practitioners The introduction of the new regulatory framework will have a profound impact on Australia's crypto asset industry in both the short and long term. In the short term, Australia's crypto asset industry will face compliance pressures and an opportunity for industry reshuffling. For crypto exchanges and custodians currently active in the Australian market, obtaining an Australian Financial Services License (AFSL) and complying with the new regulations will become new hurdles. In other words, relevant practitioners need to assess their own businesses during the transition period and submit detailed license application materials to the Australian Securities and Investments Commission (ASIC), including business plans, risk management plans, compliance structures, and qualification certificates of responsible persons. This will be a major test for the compliance teams and legal advisors of these companies. Some smaller or less resource-rich players may choose to exit the market or shift their focus to serving overseas clients, leading to industry consolidation. Larger players, on the other hand, will invest capital and manpower to actively apply for licenses and adjust internal processes in advance to meet requirements. These measures may increase operating costs, but they also enhance the platform's robustness. Furthermore, under a government-backed licensing system, Australian investors may be more inclined to trade through exchanges and custodians holding Australian Financial Services Licenses (AFSLs), as these institutions are regulated by the Australian Securities and Investments Commission (ASIC), thus offering greater credibility and security. Companies that fail to obtain licenses will be considered underground or offshore platforms, facing increasing difficulties in conducting business—not only will customer confidence be waning, but traditional financial service providers such as banks will also be more cautious about the compliance risks involved in partnering with them. Therefore, the new policy will drive industry consolidation: compliant operators are expected to expand their market share, while non-compliant operators will gradually be eliminated or relegated to the gray area. In terms of medium- to long-term impact, Australia's crypto asset industry will gain more opportunities for standardized development and international cooperation. In the long run, government regulation will help the digital asset industry develop in a standardized and large-scale manner. On the one hand, strengthened investor protection will increase user trust, and more mainstream institutions and individuals may feel comfortable participating in crypto investment, thereby expanding the market size. On the other hand, licensed operation can help crypto companies connect with traditional finance—for example, easier access to banking services, insurance support, and even legal advertising and promotion—resources that were previously limited. These impacts will help improve the sustainability of the crypto industry ecosystem. Furthermore, a clear regulatory environment can attract international compliant capital and companies to Australia. For some crypto companies seeking global expansion, Australia's new regulations provide a clear entry path: applying for an Australian Financial Services License (AFSL) and operating in Australia. Compared to jurisdictions with uncertain regulations, Australia's relatively sound legal system and investor market will be more attractive. Therefore, if the new bill is ultimately passed, it will greatly help Australia become one of the hubs for digital asset business in the Asia-Pacific region. Regarding the impact on consumers and investors, the enactment of the bill can also bring a series of positive effects. The most direct impact is improved fund security—the new bill requires platforms to disclose detailed asset custody methods and strengthen internal risk control, and the Australian Securities and Investments Commission (ASIC) will also monitor relevant platforms. This regulation can reduce the probability of users suffering losses due to platform misconduct or bankruptcy. At the same time, since licensed platforms are required to report their operational status to regulators regularly, and some information will be made public, the crypto asset market can further develop towards transparency, thus helping investors better compare the reliability and service quality of different platforms. In short, regulation provides a protective umbrella for consumers and investors, and in the long run, it will help cultivate a more mature and rational investment community. However, it should be noted that not all the effects of the bill are positive; challenges also exist. For example, increased compliance costs may lead platforms to pass on some of these costs to users through measures such as raising withdrawal fees and lowering staking yields, thereby reducing user enthusiasm to some extent. Simultaneously, the pace of innovation may slow: in a free market environment, the cost of testing new products and services is low, but under regulation, every new feature launched must consider compliance, potentially delaying industry innovation and iteration. However, this "slowdown" often results in "steady and sustainable development," sacrificing some of the aggressive growth during the initial, unregulated phase for the healthy development of the industry towards maturity. Looking ahead, this article argues that cryptocurrency regulation in Australia will continue to develop along the lines of institutionalization, refinement, and international cooperation. Institutionalization means that the regulatory framework will be continuously improved and elevated to the level of legal norms. Following the passage of this digital asset bill, we anticipate further improvements to related supporting regulatory guidelines and secondary regulations, including capital and reserve requirements for digital asset platforms (to prevent bank runs), independent third-party auditing requirements for custodied assets, and standardized information disclosure formats for platform operators. Simultaneously, the Australian government may further assess whether other existing laws need revision to align with the new bill. For example, should the Australian Insolvency Act include provisions clarifying the priority of customers' digital assets in the event of a cryptocurrency exchange's bankruptcy? Or should the definitions of digital assets in the Australian Securities Act and Tax Act be aligned with the new bill? As time progresses, crypto assets may be gradually incorporated into the regulatory framework of various related legal areas (such as inheritance, anti-fraud, and accounting standards), thus truly integrating into the economic system. The refinement is reflected in the fact that regulators will continuously adjust their strategies according to industry evolution. After initially establishing licensing regulations, the Australian Securities and Investments Commission (ASIC) and the Australian Treasury may further monitor industry risks and respond to emerging issues in the next two to three years. For example, stablecoin regulation may be on the agenda. Furthermore, regulatory measures for DeFi may be further strengthened. In addition, in the NFT and metaverse asset fields, if financialization functions emerge (such as NFT fragmented trading and NFT staking lending), their regulation may also be further included in the discussion. Overall, regulators will continue to conduct "token mapping" research in practice, clarifying which new businesses need to be regulated and what kind of regulatory sandbox or guidelines are needed for pilot testing. This refined management will ensure that regulation neither lags too far behind the market nor hinders innovation with a one-size-fits-all approach. In terms of international cooperation, Australia is likely to strengthen coordination with other jurisdictions. Crypto assets are inherently cross-border, and regulatory measures from one country often require cooperation from other countries to be effective. For example, enforcement cooperation: if unlicensed overseas exchanges provide services to Australian users, the Australian Securities and Investments Commission (ASIC) may need to collaborate with the regulatory authorities of the country where the exchange is located to take joint action within the next two to three years. Currently, Australia is a member of the Financial Action Task Force (FATF) and the International Organization of Securities Commissions (IOSCO), all of which are promoting global crypto regulatory standards. At the same time, the evolution of Australian regulatory policies may also draw on other international practices: for example, the experience of the EU's Crypto Asset Markets Regulation (MiCA), the effectiveness of Singapore's changes to licensing conditions, and the US's attitude towards decentralized protocols may all be lessons that Australia can learn from. It is foreseeable that in the near future, crypto regulations in major economies will gradually converge, achieving a certain degree of mutual recognition of rules or interoperability of regulatory sandboxes. Finally, from a macro perspective, with the implementation of these regulatory measures, Australia will gain greater initiative in its digital economy transformation. The Australian government views blockchain and digital assets as crucial components of future finance, and improved regulation is essential for their legitimacy and empowerment. It is foreseeable that once the regulatory framework matures, crypto assets will be more smoothly integrated with traditional financial assets—for example, security token offerings (STOs), asset tokenization trading platforms operating in a compliant environment, traditional funds legally investing in digital assets, and banks securely conducting digital asset custody services. These currently seemingly forbidden areas for "traditional finance touching crypto" may be opened up in the future, thereby unleashing greater market potential. 6. Conclusion In summary, recent developments in Australia's crypto asset tax system and regulation demonstrate a significant trend towards standardization and proactive measures. From maintaining the existing tax framework and emphasizing the application of principles to enacting the first dedicated legislation and filling regulatory gaps, all indications suggest that Australia is striving to catch up with global crypto regulation. In this new regulatory era, practitioners will face higher compliance requirements and responsibilities, investors will gain stronger protection and confidence, and the market will operate more transparently and orderly. With both challenges and opportunities, all parties involved in Australia's crypto industry need to adjust their strategies promptly: companies should embrace regulation and improve internal governance to achieve legal status; investors should also strengthen their risk awareness and choose compliant channels to participate in the market. In the coming years, we will continue to witness the evolution of Australia's crypto tax system and regulation, and its lessons learned will provide valuable reference models for other countries.
Catherine
Anais
Joy
Kikyo
Weatherly