As Australia attempts to stay ahead of the cryptocurrency curve, regulation and compliance will become essential elements. Crypto news has been abuzz throughout 2025 with talk of coming regulations that will lower barriers and instil confidence in investors.
One of the largest moves in the direction of stronger regulation is coming from the Australian Securities and Investment Commission (ASIC). The regulatory body is now administering licensing for certain individuals and establishments, bringing some of the security measures of traditional finance into the digital world.
What does all of this mean? Who will be required to obtain a licence, and are there any exceptions? Rather than worrying about crypto prices for the moment, it helps to know what institutions face when applying. Below is a breakdown of what the requirements for such a licence are and who may be able to obtain an exemption.
Australian Financial Services License (AFSL)
One of the core tenets is the issuance of an Australian Financial Services License (AFSL). In essence, this licence would give financial institutions and individuals the ability to provide financial services, especially as it relates to cryptocurrencies and other digital assets.
There are several requirements in order to obtain said licence. Any applicant must have responsible managers, the necessary financial resources, organisational competence, dispute resolution (for retail clients), compliance and risk management systems, and a good reputation. Let’s break it down in greater detail:
Core Requirements
Though it was touched upon in the previous paragraph, there are several core tenets that an applicant must adhere to. Let’s take a closer look at each to gain a better idea of what they entail below:
Responsible Managers. Institutions are required to appoint certain individuals that have the proper level of experience, qualifications, and competence required to run and manage the business.
Organisational Competence. Each applicant must demonstrate that it has the necessary qualified staff, not to mention the requisite resources, in order to provide accurate financial services and to ensure proper compliance.
Compliance and Risk Management. Applicants are also required to have a thorough, robust system in place for managing conflicts of interest, handling compliance, and tackling risk management. Moreover, this system should be tailored specifically to the applicant’s business.
Financial Resources. On top of that, applicants will be required to demonstrate that they have the proper technological, human, and financial resources needed to properly run the business.
Dispute Resolution. An internal dispute resolution system must be in place as well. For retail clients, an approved external dispute resolution system must be in place as well, with a scheme similar to that of the Australian Financial Complaints Authority (AFCA).
Reputation. Finally, there is the need for an applicant to display good judgement, honesty, and character.
Each of these factors must be complied with in order to obtain a licence. A failure in any area may result in a rejected application.
The Application Process
Next, it is important to understand the process entailing the application for an AFSL. The steps are relatively simple. For starters, use the ASIC Regulatory Portal, submitting applications thusly.
For there, organisations will be required to submit any supporting documents. Proof of competence, an organisational chart, etc. will all need to be uploaded directly to the ASIC Regulatory Portal. There is an application fee that must be paid as well.
The process is not a quick one. ASIC will then assess the application, a process that can take anywhere from 4 to 8 months. More information may be requested during this time. Before the licence is officially granted, ASIC will send a “requirements letter”, asking for final evidence such as an AFCA membership or proof of professional indemnity insurance.
Considerations to Make
With all ducks in a row, there are a few considerations to keep in mind. For starters, the fit and proper requirement extends to every officer of that corporate body, not just the ones who have more direct AFSL duties.
It is more than advisable to seek legal advice for this process. If your business model is a less common one, legal advice becomes even more valuable. Also, licensees will be required to meet ongoing obligations like audits and financial reports with ASIC.
Potential Exemptions
Though the licensing process is quite thorough, there are exemptions to the process. It is important to know the relevant guidelines before entering the process; applying for a licence when one is not required can be costly in more than one way.
Specific Groups
Exemptions can apply to product issuers that deal exclusively through licensed providers or happen to be members of a corporate group. Let’s break it down into the various groups that fall under exemption:
Financial Counselling Agencies (FCAs). These agencies can be exempt should they provide independent, free advice, have no association with a financial services business, do not charge fees, ensure their counsellors have appropriate training and are members of a compliant association.
Foreign Financial Service Providers (FFSPs). There are several potential exemptions for foreign entities. Those who have sufficient regulatory equivalence in their own country qualify. The same goes for those who provide services to professional Australian investors that meet the necessary conditions.
Corporate Group Members. Another exemption may apply to those businesses that provide financial services to other related corporate bodies.
Product Manufacturers. Those who issue scheme interests may potentially be exempt but only if they sell exclusively through partnered licensed financial services providers. Think of this as licensing through osmosis.
Unregistered Scheme Trustees. The final exemption belongs to trustees of an unregulated scheme that also has a licensed related manager who accepts responsibility for those services.
Key Conditions
There are a number of provisions to consider when it comes to an AFSL exemption. For instance, foreign providers may be exempt so long as they provide services only to professional or wholesale investors.
Exemptions may also see limitations to activity. This may be more specific, such as being able to only give financial product advice or dealing exclusively in derivatives, among other things. Additionally, exemptions are dependent on location and any potential oversight from a home regulatory body.
Finally, exemptions require that each financial institution have the necessary staff training and that staff meet specific professional standards. Failure to provide those things may remove the possibility of an exemption. Further communication with ASIC is always encouraged, as it provides greater clarity about the process, its requirements, and the possible exemptions made available.
Conclusion
The time of regulatory uncertainty for cryptocurrencies and digital assets is coming to a close. Countries like Australia are taking progressive measures to bridge the gap between current and traditional finance measures.
By instituting stricter and clearer regulations like licensing, investor confidence can and should grow. Moreover, it will take some of the “Wild West” feeling out of crypto, a barrier that has naturally limited involvement. Procedures will no doubt be tweaked and refined over time, making the process better and more efficient along the way.
