The Australian financial services regulatory landscape – in its present form – presents significant complexity and uncertainty for digital rights and asset businesses due to the absence of bespoke reform addressing the uniquities of the sector. The gap between the existing framework and the novel financial products offered in Australia by many businesses has been in recent years plugged by the courts applying regulation on first principles and by analogy. This has led to interesting judgments from the perspective of lawyers, but uncertainty and expenses for digital asset providers, exchanges, and consumers, and resulting impediment on local innovation.
This week, an exposure draft bill published by the Department of the Treasury proposes to change that position and appears to represent a step towards bringing regulatory clarity to the sector.
The primary development in the exposure draft is to deem products offered by certain digital asset and blockchain services as financial products, meaning that most providers of digital asset platforms and tokenised custody platforms will be required to hold an Australian Financial Services Licence (AFSL) under the Corporations Act 2001 (Cth). While there is some nuance in the bill excluding certain products (for instance, in-game tokens that do not represent a significant part of the business) the default position will be that most businesses will need to be licensed. The exposure draft also defines critical terms such as “digital token” and “digital asset platform”.
Holders of AFSLs are regulated by ASIC, and are required to have (among other things) adequate risk management systems, competent and trained employees and managers, and adequate resources to provide the financial services and comply with regulatory obligations.
There are other proposed exemptions, including for intermediated staking arrangement and platforms that have less $10 million in transactions per year and have less than $5,000 in assets per customer.
This exposure legislation represents a significant step in the development of Australia’s financial services sector to incorporate products based on digital rights and assets and businesses in the sector will benefit from following the legislative process, however it is only an initial step in this process and more will be required to stimulate local innovation at the levels seen in many other jurisdictions. To this end, the Department of the Treasury has invited submissions on the draft legislation, due 24 October 2025. However, in the meantime businesses will still need to manage their regulatory based on the current framework until the legislation take effect in the future.
If you would like assistance drafting a submission, or have any further questions regarding compliance with the draft legislation or the existing regime, our Australian team has experts who can advise at all stages of corporate regulatory compliance. Please reach out anytime.
For further information, please contact:
Jonathon Ellis, Partner, Bird & Bird
jonathon.ellis@twobirds.com
