The Treasury is getting ready to table its draft legislation for regulating digital asset platforms in parliament. If passed, the bill will bring exchanges and wallet providers under the existing Corporations Act, which will require them to obtain an Australian Financial Services Licence (AFSL).
The draft legislation has been in the works for years and aims to prevent events like the collapse of FTX, which saw Aussies lose millions. “It is about legitimising the good actors and shutting out the bad, giving businesses certainty and giving consumers confidence,” said Assistant Treasurer and Minister for Financial Services Daniel Mulino.
Exchanges are expected to face stricter custody safeguards, including segregation of client assets and minimum capital reserves.
Who the Draft Legislation is Targeting
The draft mainly focuses on digital asset platforms (DAP) and tokenised custody platforms (TCP), which the government introduced as new financial products. Some of the crypto businesses that will be affected by the new licensing requirements include exchanges, custodians, and stablecoin issuers. In addition to obtaining a licence, they will need to follow ASIC guidelines or face fines of up to 10% of their annual revenue.
New Licensing and Custody Rules for Exchanges
After years of operating in a less-defined regulatory environment, the major Australian exchanges will be required to meet the same strict standards as traditional finance.
The draft legislation treats DAPs as financial products, bringing them into the AFSL regime. Under the proposed rules, exchanges will be required to hold a minimum of A$10 million in net tangible assets.
However, smaller operators that handle less than A$5000 per client will not need to obtain a full AFSL and, as a result, are not required to meet minimum capital requirements.
“We believe this framework will help support responsible actors in the Australian crypto market,” Kraken Australia managing director Jonathon Miller told The Australian. He commended the government for not using a “one-size-fits-all approach that could stifle competition or disadvantage smaller innovators”.
In addition to the minimum capital requirement, exchanges will also be required to put in place clear and transparent rules governing how the platform processes transactions and settlements. They must provide honest disclosures to clients outlining risks.
Additionally, both domestic and foreign exchanges providing services to Aussies must register with AUSTRAC and maintain effective AML programmes.
While these obligations will increase costs for most exchanges, compliance is expected to be profitable as fraudulent actors are pushed out. Major local exchanges, including Independent Reserve and BTC Markets, support the legislation and are working towards compliance.
OKX Australia CEO Kate Cooper also praised the proposed bill but cautioned that the real challenge will be implementation. “The real measure of this reform will be shown by the compliance and enforcement that follows its implementation, ensuring that responsible, licensed operators aren’t undercut by unregulated players and that Australian consumers are protected,” she said.
Wallet Providers Face Tighter Oversight
The draft legislation focuses on custodial wallets, and non-custodial wallets are excluded. The reason for that is that custodial wallet providers hold the private keys to a client’s digital assets.
Under the proposed law, custodial or hosted wallet providers are subject to DAP regulation and require an AFSL. Non-custodial service providers are largely spared the brunt of the proposed law, but they will need a licence if they also provide financial advice to clients.
On 29 October 2025, ASIC announced an 8-month transition period for crypto asset service providers, giving them much-needed time to meet compliance requirements. “We recognise that firms will need time to consider the updated guidance and apply for licences, so ASIC has granted a sector-wide no-action position until 30 June 2026,” said ASIC Commissioner Alan Kirkland.
Providers of hosted wallets will need to comply with the same obligations as exchanges since they also need an AFSL. These include anti-money laundering, disclosure, and asset-holding requirements.
Traders and Investors: What Changes on the Ground
Individual crypto traders and investors will see both benefits and new obligations from the proposed law. One thing investors may like is that the draft legislation bans exchanges from commingling customer assets with their own. This seemingly innocent practice was what happened at FTX before trouble struck and thousands lost their money.
The proposed law will also require exchanges to be transparent with customers on potential risks and terms. With this information, customers can pick an exchange that aligns with their risk tolerance.
One thing the draft legislation doesn’t do is change existing obligations for investors. Traders must still report their capital gains on crypto transactions to the Australian Tax Office (ATO).
In addition, traders must also provide exchanges and wallets with the necessary information to meet customer due diligence and know-your-customer (KYC) requirements.
While the draft legislation does offer customer protections, these come at the expense of the token choices available on the market. Many exchanges are expected to delist high-risk tokens to reduce compliance costs. In addition, some Australian exchanges, such as Crypto.com, have discontinued staking and other services that may draw scrutiny.
Implementation Timeline
The consultation phase for the draft legislation closed towards the end of October, and the Treasury is currently reviewing submissions. The bill will then be updated to its final version before being brought before MPs.
Once in parliament, most observers expect it to pass quickly. However, it’s unlikely to come into force before 2026, and the government is expected to provide a transition period for existing exchanges and wallet providers.
