Australia plans to introduce new regulations for encryption: A preview of the digital asset framework bill.

In November 2025, the Australian Minister of Finance and the Minister for Financial Services officially submitted the Corporations Amendment (Digital Assets Framework) Bill 2025 (hereinafter referred to as the “Digital Assets Framework Bill”) to the Federal Parliament, intending to include “digital asset platforms” and “tokenized custody platforms” within the scope of the Corporations Act. Specifically, it aims to fully place encryption trading and custody business under the supervision of the Australian Securities and Investments Commission (ASIC) relying on the Australian Financial Services License (AFSL) system.

This article argues that this move reflects Australia’s intention to supplement the regulatory system for encryption transactions and custody businesses at the legislative level, while maintaining the existing tone of “current tax law treatment of digital assets.” It marks Australia’s further alignment from the previous baseline regulatory model towards a comprehensive financial regulatory model focused on platform and custody. This article will systematically review the core content of the digital asset framework bill and the shift in regulatory concepts it reflects, starting from the existing tax system and regulatory framework for Australia’s digital assets. It will also further assess the potential impact of this legislation on the compliance costs, business models, and cross-border layout of cryptocurrency exchanges and custody institutions operating in Australia, thereby providing insights and references for practitioners and researchers in the crypto industry.

1. The existing regulatory framework for digital assets in Australia

Before the “digital asset framework bill” takes effect, Australia's regulatory system for encryption assets mainly consists of three levels: tax regulation, anti-money laundering and counter-terrorism financing regulation (AML/CFT), and fragmented financial regulation.

In terms of tax regulation, overall, Australia does not establish new tax categories specifically for encryption but prioritizes the application of existing general tax laws to handle all encryption transactions. In 2021, the Australian Board of Taxation collaborated with several law firms, accounting firms, and other intermediaries to conduct a comprehensive review of the tax treatment of digital assets and related transactions in Australia, and it formed an evaluation report on the taxation issues related to encryption transactions in 2024. The report concluded that the current tax laws in Australia can generally address the taxation issues of digital assets and related transactions, a viewpoint that was subsequently recognized by the Australian Treasury, which also believes that it is not appropriate at this stage to introduce special tax legislation for cryptocurrencies. Therefore, while the current tax laws in Australia acknowledge the uniqueness of encryption, they will not introduce a “crypto tax” or establish large-scale special rules, but rather prefer to apply the existing tax law rules.

One of the important aspects of anti-money laundering and counter-terrorism financing (AML/CFT) regulation.

In terms of scattered financial regulation, Australia's existing laws primarily use “whether encryption businesses are similar to traditional financial products” as the main criterion for determining the applicability of financial regulatory laws: if a certain digital asset essentially constitutes a part of securities, derivatives, or managed investment schemes, then related issuance, trading, and consulting activities will fall under the financial regulatory scope of the Australian Securities and Investments Commission (ASIC); conversely, typical “pure cryptocurrencies” (such as Bitcoin, ETH), as well as trading platforms that do not involve derivatives, are often not considered financial products or financial service providers, and thus do not fall under the relevant regulations of financial supervision.

In summary, before the introduction of the “Digital Asset Framework Bill”, Australia had initially established a multi-layered governance framework covering encryption assets through three dimensions: tax regulation, anti-money laundering and counter-terrorism financing regulation, and fragmented financial regulation. If the “Digital Asset Framework Bill” is ultimately passed, it will further unify the legal application standards in the field of encryption assets and clarify regulatory boundaries and subject obligations.

2. The regulatory framework for cryptocurrency trading proposed by the “digital asset framework bill”

The logic of the proposed digital asset framework bill can be briefly summarized as follows: first, a definition of the platform is established, then the platform is regarded as a financial product, and finally, the operators of the platform are further regulated using the Australian Financial Services License (AFSL). At the same time, the content of the bill also reflects many attributes customized for the encryption industry. Specifically:

Firstly, two new types of financial products have been introduced in the Company Law: Digital Asset Platform (DAP) and Tokenized Custody Platform (TCP). Among them, the Digital Asset Platform (DAP) refers to a “facility” where operators hold digital tokens on behalf of clients, with typical examples being centralized encryption cryptocurrency exchanges and custody wallet services. The key aspect of the Tokenized Custody Platform (TCP) lies in the “tokenization of real-world assets,” usually identified by the operator, who recognizes an underlying asset (excluding currency), then creates a digital token representing the delivery rights of that asset and holds the underlying asset in custody. For example, using physical gold, real estate, or bonds as underlying assets, corresponding tokens are issued, and investors can hold the tokens to redeem or instruct the delivery of the asset as agreed. By incorporating these two concepts into legal regulations, the bill systematically treats the business of holding digital assets and tokenized assets as financial products for the first time, rather than simply applying existing financial regulatory frameworks.

As mentioned above, once the digital asset platform and the tokenized accomplice platform are recognized as financial products, “providing financial services around such products” (including issuance, transaction matching, custody, providing advice, etc.) will, in principle, require holding an Australian Financial Services License (AFSL). The Australian Treasury has clearly stated that companies providing services on the above platforms must obtain, in principle, an Australian Financial Services License (AFSL) and are subject to financial regulation by the Australian Securities and Investments Commission (ASIC), with applicable basic obligations consistent with traditional financial service providers. For CeFi exchanges and custody institutions, if the bill comes into effect, they may need to align more closely with traditional regulated financial institutions in terms of organizational structure, compliance departments, risk management, client asset segregation, information disclosure, and even dispute resolution.

In addition, the digital asset framework bill also reflects differentiated thinking at the institutional design level. Specifically, the bill provides an exemption from the Australian Financial Services License (AFSL) requirements for digital asset platforms that pose very low risks to clients, specifically including service providers whose business falls into two categories: “businesses that belong to the low-value category (i.e., do not meet the specified financial thresholds)” and “those whose services do not constitute a significant part of their business.” The first category applies to digital asset platform operators, while the second category applies to personnel providing services related to such platforms. Meanwhile, the bill stipulates that if a platform holds customer tokens and participates in staking and distributing returns on their behalf, it constitutes “custodial staking,” which falls under the category of business subject to regulation; whereas if users control their private keys and directly participate in staking on-chain, it is considered “non-custodial staking,” which does not fall within the scope of this bill. Furthermore, for “wrapped tokens” that grant holders redemption rights, the bill disregards the existence of their redemption rights when determining whether such tokens constitute financial products and instead returns to the essential characteristics of the assets or rights they represent.

On an operational level, the bill concurrently confirms that for open blockchain infrastructure such as Bitcoin and Ethereum, the bill will not directly classify them as financial market infrastructure or financial products, thereby avoiding the imposition of unmanageable compliance obligations on the underlying open-source protocols. At the same time, if the “digital asset bill” is passed, a transitional period of 18 months will be established after the reform is initiated.

3. The Regulatory Trends of Australia's Digital Asset Regulations Reflected by the Bill

The introduction of the “Digital Asset Framework” bill marks a new phase in Australia's cryptocurrency regulation and reflects a significant shift in regulatory thinking over the past two to three years.

First of all, this is a breakthrough from nothing to something. As mentioned earlier, Australia previously had no specialized financial regulation in the field of encryption trading platforms and accomplice, with regulatory focus remaining on bottom-line areas such as anti-money laundering. This legislation is the first to bring encryption platforms under mainstream financial regulation, indicating that the government recognizes that the digital asset industry needs to be supervised as strictly as traditional markets like securities and derivatives. This shift is driven to some extent by international trends and risk events: at the international level, the EU's introduction of the Markets in Crypto-Assets Regulation (MiCA) in 2023, the United States strengthening enforcement against encryption exchanges, and financial centers in Asia such as Singapore launching licensing systems reflect a tightening global regulatory environment; at the domestic level in Australia, Australian investors have deeply engaged in the encryption market over the past few years, and the collapse of some cross-border exchanges (such as FTX) has also affected Australian users, prompting calls from the public and political circles to strengthen domestic regulation. Therefore, the Australian government has chosen to align with the trend by strengthening regulatory efforts in legislation, making adjustments to its previous laissez-faire attitude. The signal released by the new bill is clear: Australia no longer views the encryption industry as a special zone outside the financial system, but is gradually integrating it into unified regulation within the financial system.

Secondly, the regulatory tone of Australia and other countries has shifted from cautious observation to active governance. Looking back at the actions of the Australian government over the past two years, a gradual path can be observed: from late 2022 to early 2023, the Australian Treasury conducted research and consultation work on “Token Mapping.” Token Mapping refers to sorting out the functions and legal attributes of various encryption tokens, assessing whether existing regulations cover these attributes, thereby identifying regulatory gaps. At that time, the government's position was to first clarify “what to regulate” before deciding “how to regulate.” The Token Mapping consultation report published in February 2023 is regarded as the foundational document for subsequent policies, recommending which tokens may need legislative oversight and which can maintain the status quo. Subsequently, in the second half of 2023, the Australian government drafted an initial regulatory framework for digital asset platforms (namely the draft bill titled “Regulation of Digital Assets and Tokenized Accomplice Platforms” published by the Australian Treasury in September 2025) and sought industry feedback. After several months of refinement, it was officially submitted to Parliament in November 2025. From these steps, it is evident that Australian regulators have transitioned from preliminary research to formal legislation, clearly taking a step forward in their attitude. Especially after the Albanese government took office in 2022, there were concerns in the market that the new government would slow down the proposed encryption regulation steps of the previous government, but the actual process indicates that the new government also recognizes the necessity of regulation and chooses to proceed steadily. The shift from a lack of regulations to having regulations also conveys a policy signal: Australia aims 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 particularly emphasizes that this legislation will “enhance consumer protection, modernize the regulatory system, boost confidence, and attract investment.” It can be seen that regulators are not trying to suppress the industry, but are striving to seek a governance model that balances protection and innovation. This trend aligns with many Western countries: embracing the economic opportunities brought by new technologies, but with the prerequisite of setting up firewalls to prevent risks.

Thirdly, the new bill reflects a subtle adjustment in policy focus. Compared to a few years ago when the Australian government emphasized tax treatment and combating illegal uses, the current policy focus has shifted towards market institution regulation and investor protection. For example, earlier discussions were more centered around how to tax encrypted transactions and whether citizens were using encryption for tax evasion; while a recent series of measures (including legislative requirements for licensing and plans to strengthen the relationship between banks and the encryption industry) have focused on establishing a fair and orderly market. This shows that the regulatory “weather vane” has shifted: from viewing encryption as an emerging, niche speculative tool to seeing it as part of the mainstream financial ecosystem that requires regular regulation. Meanwhile, the government's understanding of the encryption industry has also become more comprehensive. For instance, the government has initiated research on central bank digital currencies (CBDC), supporting the Reserve Bank of Australia in conducting a trial of the digital Australian dollar (eAUD) in 2023 and planning to discuss the launch of a broader digital financial innovation testing environment in 2025. These initiatives indicate that the Australian government is trying to achieve a dynamic balance between regulatory constraints and support for innovation. On one hand, there is strict control over encryption intermediary institutions, while on the other hand, space and policy support are reserved for new technology applications (such as CBDC and DeFi). It can be anticipated that future encryption regulation in Australia will no longer be a “vacuum zone” that is left unchecked, but will resemble traditional financial markets with complete licensing management, risk monitoring, and international coordination mechanisms, while the authorities will also actively explore innovations to maintain their position in the global fintech competition.

Finally, the new regulatory framework echoes the international wave of cryptocurrency regulation. Especially in terms of investor protection, Australia has drawn on the experiences of many other countries, such as requiring trading platforms to implement asset custody segregation for customer assets and introducing compensation schemes. This is similar to New York's requirements for cryptocurrency custody or the reserve fund regulations in the European Markets in Crypto-Assets Regulation (MiCA). Australia's choice to integrate cryptocurrency services into the existing financial licensing system (rather than creating an entirely new independent set of regulations) also reflects a trend towards convergence with the UK, Singapore, and others—using mature financial regulatory frameworks to supervise new types of assets, thereby ensuring regulatory consistency and cross-market collaboration. As the Financial Action Task Force (FATF) encourages countries to implement the “travel rule” (requirements for cryptocurrency transfer information disclosure) and the G20 discusses global cryptocurrency regulatory standards, Australia's new legislation also makes its domestic regulatory framework easier to align with international standards. For example, when the Australian Transaction Reports and Analysis Centre (AUSTRAC) must expand its regulatory scope starting in 2026, Australia will basically meet the FATF's requirements for comprehensive regulation of Virtual Asset Service Providers (VASPs).

Overall, Australia's regulatory stance has shifted from being a bystander to an active participant: proactively shaping the rules through legislation and policy, rather than merely waiting for international consensus. This change helps Australia have a greater voice in the global dialogue on digital asset governance and to build its image as a “trusted and competitive center for digital asset innovation.”

4. The Impact of Legislation on Practitioners in the Encryption Industry

The introduction of the new regulatory framework will have a profound impact on Australia's digital asset industry in both the short and long term.

In the short term, Australia's digital asset industry will face compliance pressures and opportunities for industry reshuffling. For the currently active cryptocurrency exchanges and custodians in the Australian market, obtaining an Australian Financial Services License (AFSL) and complying with new regulations will become a new threshold. In other words, relevant practitioners need to assess their businesses during the transition period and submit detailed license application materials to the Australian Securities and Investments Commission (ASIC), including business plans, risk management schemes, compliance frameworks, and qualifications of responsible persons. This will be a significant test for the compliance teams and legal advisors of companies. Some smaller or resource-lacking practitioners may choose to exit the market or shift to serving overseas clients, leading to industry consolidation. In contrast, larger practitioners will invest funds and manpower to actively apply for licenses, adjusting internal processes in advance to meet requirements. These measures may increase operational costs, but they can also enhance the platform's robustness. Meanwhile, under the government-backed licensing system, future Australian investors may be more inclined to choose exchanges and custodians that have obtained an Australian Financial Services License (AFSL) for trading, as these institutions are regulated by the Australian Securities and Investments Commission (ASIC), thus having higher credibility and safety. Companies that fail to obtain licenses will be regarded as underground or offshore platforms, making it increasingly difficult to conduct business—not only will customer confidence be lacking, but traditional financial service providers like banks will also be more cautious in considering the compliance risks of cooperating with them. Therefore, the new policy will drive a survival of the fittest in the industry: compliant operators are expected to increase their market share, while non-compliant ones will gradually be eliminated or pushed into gray areas.

In terms of medium- and long-term impacts, Australia's digital asset industry will gain more opportunities for regulated development and international cooperation. In the long run, government regulation will help standardize and scale the development of the digital asset industry. On one hand, after strengthening investor protection, user trust will increase, and more mainstream institutions and individuals may feel secure participating in crypto investments, thereby expanding market size. On the other hand, licensed operations can help crypto companies connect with traditional finance—such as easier access to banking services, insurance support, and even legally restricted resources like advertising promotions. These effects contribute to improving the sustainability of the crypto industry ecosystem. Additionally, a clear regulatory environment can attract international compliant capital and businesses to enter Australia. For some crypto companies seeking global expansion, Australia's new regulations provide a clear pathway for entry, namely applying for an Australian Financial Services License (AFSL) and conducting business in Australia. Compared to jurisdictions with regulatory uncertainty, Australia's relatively well-developed legal system and investor market will have greater appeal. Therefore, if the new bill is ultimately passed, it will greatly assist Australia in becoming one of the hubs for digital asset business in the Asia-Pacific region.

In terms of the impact on consumers and investors, the introduction of the bill can also bring a series of positive effects. Among them, the most direct impact is the increased security of funds—the new bill requires platforms to disclose their asset custody methods in detail and strengthen internal risk control, and the Australian Securities and Investments Commission (ASIC) will also monitor the relevant platforms. Such 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 regularly report their operational status to regulatory authorities, some information will also be made public, allowing the cryptocurrency asset market to further develop towards transparency, which helps investors better compare the reliability and service quality of different platforms. In short, regulation provides a safety net for consumers and investors, and in the long run, it helps cultivate a more mature and rational investment community.

However, it is important to note that not all the impacts of the legislation are positive, and challenges also exist. For example, after the increase in compliance costs, the platform may pass some of these costs onto users through higher withdrawal fees or lower staking yields, thereby decreasing user enthusiasm to participate to some extent. At the same time, the speed of innovation may slow down: in a free market environment, the cost of experimenting with new products and services is relatively low, but once regulated, every new feature must consider compliance, which may delay the innovation iteration in the industry. However, this “slowdown” often leads to “stable and far-reaching” development, meaning sacrificing some aggressive growth during the wild growth phase for the healthy development of the industry as it stabilizes towards maturity.

5. The Future Direction of Australia's Encryption Regulation

Looking ahead, this article believes that Australia's cryptocurrency regulation will continue to develop in the direction of institutionalization, refinement, and international cooperation.

Institutionalization means that the regulatory framework will continuously improve and rise to the norm of law. After the passage of this digital asset bill, we expect that there may be further improvements to the relevant supporting regulatory guidelines and secondary regulations in the future, including requirements for capital and reserves of digital asset platforms (to prevent run risks), independent third-party audit regulations for custodial assets, and standards for information disclosure formats for platform operators, among others. At the same time, the Australian government may further assess whether existing other laws need to be amended to align. For example, whether the Australian Bankruptcy Act should add provisions to clarify the priority of customer digital assets in the event of bankruptcy of cryptocurrency exchanges; or whether the definitions of terms related to digital assets in the Australian Securities Act and Tax Act need to be unified with the new bill, etc. As time progresses, encryption assets may gradually be incorporated into the regulatory scope of various related legal fields (such as inheritance, anti-fraud, accounting standards, etc.), thus truly integrating into the economic system.

Refinement is reflected in the fact that regulators will continuously adjust strategies based on industry evolution. After initially establishing a licensing regulatory framework, the Australian Securities and Investments Commission (ASIC) and the Australian Treasury may further monitor industry risks and respond to emerging new issues in the next two to three years. For example, regulation of stablecoins may be prioritized. Similarly, regulatory measures regarding DeFi may be further strengthened. Additionally, in the fields of NFTs and metaverse assets, if they exhibit financial functionalities (such as NFT fragmentation trading, NFT collateral lending), their regulation may also be further included in discussions. Overall, regulators will continuously conduct “token mapping” studies in practice to clarify which new businesses need to be managed and what kind of regulatory sandbox or guidelines are required for preliminary experimentation. This refined management will ensure that regulation does not lag too far behind the market while avoiding a one-size-fits-all approach that hinders innovation.

In terms of international cooperation, Australia may strengthen its coordination with other jurisdictions. The nature of digital assets is cross-border, and the regulatory measures of one country often require the cooperation of others to be effective. For example, in law enforcement cooperation: if an unlicensed overseas exchange provides 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 in the next two to three years. Currently, Australia is already a member of the Financial Action Task Force (FATF), the International Organization of Securities Commissions (IOSCO), and other organizations that are promoting global standards for crypto regulation. At the same time, the evolution of Australian regulatory policies may also refer to other international practices: for example, the experience of the European Union’s Markets in Crypto-Assets Regulation (MiCA), the effects of changes in licensing conditions in Singapore, and the United States' attitude towards decentralized protocols, all of which may be drawn upon by Australia. It is foreseeable that in the near future, the crypto regulation of major economies will gradually converge, achieving a certain degree of mutual recognition of rules or regulatory sandbox interoperability.

Finally, from a macro perspective, with the implementation of this series of regulatory measures, Australia will gain greater initiative in its digital economy transformation. Blockchain and digital assets are regarded by the government as important components of future finance, and improving regulation serves to legitimize and empower them. It is foreseeable that, once the regulatory framework matures, encryption assets are expected to achieve a smoother integration with traditional financial assets—such as the issuance of security token offerings (STO) and the operation of asset tokenization trading platforms in a compliant environment, traditional funds can legally invest in digital assets, and banks can safely conduct digital asset accomplice services, among others. What currently seems to be the “forbidden zone” of traditional finance touching encryption may be opened in the future, thereby unleashing greater market potential.

6. Conclusion

In summary, the recent dynamics of Australia's digital asset tax system and regulation show a significant trend towards normalization and proactivity. From maintaining the existing framework and emphasizing the applicability of principles in taxation, to introducing the first dedicated legislation in regulation to fill institutional gaps, various signs indicate that Australia is striving to keep pace with global crypto regulation. In this new regulatory era, industry participants will face higher compliance requirements and responsibilities, investors will gain stronger protection and confidence, and market operations will become more transparent and orderly. With challenges and opportunities coexisting, all parties involved in Australia's crypto industry need to adjust their strategies in a timely manner: businesses should embrace regulation and improve internal governance to achieve legal status; investors should also enhance 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 experiences and lessons will provide valuable reference paradigms for other countries.