Australia has amended its Payment Systems regulation for the first time in 25 years, with the aim of bringing crypto networks under regulatory oversight.
This is after Parliament passed the Treasury Laws Amendment (Payments System Modernisation) Bill 2025, which aims to factor in newer payment systems into the Payment Systems (Regulation) Act 1998.
The new law is designed to foster innovation while ensuring consumer protection. When welcoming the new law, the Australian Banking Association (ABA) recognised the need for a wider regulatory framework.
ABA CEO Simon Birmingham said, “Australia’s payments system has rapidly evolved in recent years, especially with the surge in popularity and use of mobile wallets. This is welcome progress and means global tech companies will be subject to the same oversight and consumer protection laws as the rest of the payments system.”
He added, “These new rules lay the foundation for a modern and innovative payments environment, giving Australians confidence that new payment methods are safe, reliable, and properly regulated.”
Expanded regulatory coverage
Australia’s existing payments regulation was designed in the 90s, which was way long before payment methods like mobile wallets, buy now pay later (BNPL), and crypto. This meant that these payment methods weren’t covered by existing consumer protection and government regulations.
Considering that the Reserve Bank of Australia (RBA) states that 95 per cent of in-person card payments today are made using contactless functionality (including through the use of mobile devices), there was a need for a new framework.
The new framework factors this in by expanding the definitions of various terms to cover new payment methods.
The first of these is the term ‘funds’, which extends beyond just money to include (but is not limited to) digital units of value, including digital currency. This definition is meant to act as an umbrella term, so it effectively encompasses digital assets like stablecoins and other cryptocurrencies.
Another term is ‘payment system’, which didn’t capture payments made through digital assets. Now, the term is defined as a system that can be used to make payments or transfer funds, or one that can allow “the transmission or receipt of messages that effect, enable, facilitate or sequence the making of payments or the transfer of funds (whether or not those payments are made, or those funds are transferred, under or pursuant to the system).” The term also extends to any instruments or procedures that relate to that system.
The last definition is the term ‘participant’, which was previously limited to corporations that take part in or administer a payment system. In the new Act, the term captures all entities involved in the value chain, whether it’s individuals making payments or companies providing services that enable payments.
New ministerial powers
The new regulation realises that modern payment systems evolve quickly, so it adds flexibility to address various developments in payment systems.
In the older regulations, only the RBA had the power to designate a payment system as a special designated payment system. This has now been extended to include the Minister, as long as the action is in the ‘national interest’. To do so, the minister needs to take into account factors such as consumer protection, crisis management, national security, cybersecurity, and AML/CTF.
Essentially, this allows the government to intervene in areas that go beyond the limit of the RBA. For example, the minister can direct a regulator to address specific items or issue policies.
A modernised penalty regime
The new Payments System Modernisation law has also factored in that financial offences are quite varied today and range in criminality levels.
In the previous framework, penalties were largely criminal in nature. This meant that prosecution was difficult, as the threshold for contraventions had to be higher to fit criminal law.
One of the major changes in the new regulations is the introduction of a civil penalty provision. It allows regulators to take people who breach the Act to court seeking civil penalties. This makes it easier to punish contraventions, so it calls for improvements in compliance.
The Act has also increased the penalties for the various criminal offences already provided for in the regulations. The maximum penalty for participants who fail to comply with a directive has been increased from 50 to 100 penalty units for individuals. Corporations will also face increased limits of up to 500 penalty units per day, up from 250. This is meant to reflect the fact that security breaches today can have far-reaching economic and personal consequences.
There’s also a new provision that allows the RBA and nominated regulators to accept and enforce undertakings from any participant in a payment system.
This means that regulators can direct a company or individual to stop particular actions, and this will be considered legally binding. In case the participant breaches the undertaking, a court can issue an order of direct compliance, require the participant to pay back any financial benefits gained, or compensate the affected parties. This makes it easy for regulators to address arising issues, as they don’t have to go to court first.
What does this mean for the industry?
When the bill passed the Senate, Assistant Treasurer and Minister for Financial Services Daniel Mulino stated that the regulation is meant to boost Australia’s payments system by modernising it and making the economy more productive.
Outside the government, the new regulation has also been widely welcomed. However, there are still some reservations from consumers and businesses, based on the Bills Digest record. Most of these express worry around the ministerial designation powers, which leave a lot of room for government control.
Block, the owner of Afterpay and Square, also raised concerns that extending card-style surcharging rules to Buy Now Pay Later (BNPL) without clear market failure would raise the costs for consumers and discourage competition.
Now that the new regulations are law and will come into effect at the end of the year, most of the debate will shift to the implementation, with more eyes on the ministerial powers.
