Australia Equates Cryptocurrency with Traditional Banks to Foster Security and Innovation

The Australian government has released a proposed legislative framework that would require cryptocurrency exchanges and custody services to secure an Australian Financial Services License (AFSL), bringing the industry in line with established financial sector regulations. Announced by Assistant Treasurer Daniel Mulino on September 25, 2025, these proposed rules are designed to strengthen consumer safeguards, boost operational transparency, and uphold market integrity, all while encouraging innovation within a regulated setting. The draft law, which is open for public feedback until October 24, 2025, marks a significant change in Australia’s digital asset regulation, shifting from a patchwork of oversight to a consolidated system under the Corporations Act.

According to the new guidelines, digital asset platforms—including those enabling crypto trading, exchanges, or transfers—as well as tokenized custody services that hold client assets, will be required to obtain an AFSL. These licenses will come with obligations such as keeping client funds separate, implementing strong cybersecurity measures, and undergoing independent audits. The draft also sets out strict rules for stablecoin issuers, mandating full collateralization and transparency to prevent under-collateralization risks. Certain “small, low-risk” providers—those managing under AUD 5,000 per customer or less than AUD 10 million in yearly transactions—will be exempt, ensuring that early-stage startups are not overburdened.

Violations of the new regulations could result in hefty penalties, including fines up to AUD 16.5 million, three times the benefit obtained, or 10% of yearly revenue, whichever is higher. These tough sanctions are intended to discourage wrongdoing and demonstrate the government’s resolve to hold crypto businesses to the same standards as traditional financial institutions. The draft also requires platforms to establish governance and risk management systems, such as maintaining minimum capital reserves and addressing conflicts of interest.

The response from the crypto industry has been mostly favorable, with leading companies like Kraken,

, and Swyftx expressing support for the regulatory clarity. While some warn that too much regulation could hinder innovation, many believe that a clear framework will draw institutional investors and increase market confidence. By aligning with international standards like Singapore’s Payment Services Act, the legislation positions Australia to compete with other emerging crypto centers in the Asia-Pacific.

This draft legislation builds on several years of regulatory development, including policy documents from 2024-2025 and a 2022 review of token classification. By integrating crypto into existing financial laws rather than creating a separate system, the government aims to strike a balance between fostering innovation and protecting investors. The final version of the law is anticipated in 2026, with implementation timelines to be adjusted based on stakeholder input.

The proposed rules reflect a worldwide movement toward stricter crypto oversight, as seen in the EU’s Markets in Crypto-Assets (MiCA) regulation and the increasingly rigorous approach in the U.S. Australia’s model stands out for its exemptions for smaller operators and its emphasis on merging digital assets with the traditional financial system. This approach is intended to create a secure, competitive landscape for both new ventures and established institutions, helping position Australia as a frontrunner in regulated crypto markets.