Australia Launches First Full-Fledged Regulatory Framework for Crypto Custody and Exchange Platforms

Background: Why Australia is tightening crypto regulation

As crypto adoption grows worldwide, unregulated exchanges and custodians have repeatedly exposed users to risks — from mismanagement to outright collapse. In response to past failures in the industry and rising concerns over investor protection, Australia chose to preempt such risks domestically. The new bill aims to close the legal gaps that previously allowed firms to custody unlimited client digital assets without robust oversight.

Moreover, as the digital asset ecosystem matures — encompassing not only cryptocurrencies but also tokenized real-world assets — regulatory clarity becomes essential to integrate crypto into the broader financial system safely and sustainably.

Key Features of the New Law

• Two new regulated categories. The bill introduces two official types of platforms under law:

  • Digital Asset Platforms (DAPs): platforms that hold clients’ crypto assets and offer services such as trading, transfers, staking, or settlement.

  • Tokenized Custody Platforms (TCPs): services managing tokenized real-world assets (e.g., property, commodities, bonds) — ensuring redeemable tokens are fully backed by the underlying assets.

• AFSL license requirement + ASIC oversight. All DAPs and TCPs must hold an Australian Financial Services Licence and comply with ASIC standards for custody, settlement, governance, disclosure, and consumer protection.

• Duty to operate fairly and transparently. Licensed platforms must act “efficiently, honestly and fairly,” provide clear disclosure to clients, maintain strong risk-management and governance frameworks, and offer dispute resolution and compensation mechanisms.

• Exemptions for small/low-risk operators. To balance innovation with regulation, the bill allows exemptions for platforms whose per-customer holdings are below a certain threshold (e.g. USD 5,000) and whose annual transaction volume stays under a given cap (e.g. USD 10 million).

• High penalties for non-compliance. Entities operating without a license or failing to meet the new standards may face severe civil penalties, including multi-million-dollar fines or proportions of annual turnover as penalty.

What It Means for Crypto Platforms and Custodians

For existing crypto exchanges and custodians, the new law represents both a challenge and an opportunity. On one hand, platforms must restructure operations, apply for AFSL, upgrade custody and settlement systems, improve transparency, and meet regulatory compliance — a non-trivial undertaking. Non-compliant operators may risk closure or heavy fines.

On the other hand, obtaining an AFSL and operating under a recognized regulatory framework offers legitimacy, which can open doors to institutional investors, partnerships with traditional finance firms, and enhanced trust from retail users. For some firms, this transition might accelerate their growth and pave the way for mainstream adoption.

For startups and smaller operators, the exemption clause provides breathing room — as long as they stay below thresholds designed for “low risk,” they may continue experimenting without the full burden of licensing, giving them a potentially valuable runway for innovation.

Benefits for Consumers and Investors

• Enhanced investor protection. Customer assets will be held under regulated custody frameworks, reducing the risk of mismanagement or insolvency-related losses.

• Greater transparency. Platforms will be required to clearly disclose how assets are held, how transactions and settlements function — helping users make informed decisions and understand their rights.

• Market stability and trust. A regulated ecosystem encourages long-term participation rather than speculative, high-risk behavior. This stability benefits both retail and institutional investors.

• Paths to mainstream finance integration. Through regulation, digital assets become more credible to traditional financial institutions, paving the way for broader adoption, institutional investment, and integration into conventional portfolios.

Broader Implications for the Global Crypto Market

By enacting the first comprehensive legal framework for crypto custody and exchange platforms — and combining fairness, consumer protection, and innovation incentives — Australia positions itself as a potential global regulatory benchmark. Other jurisdictions may follow its lead, accelerating the standardization of crypto regulation worldwide.

This trend could make crypto markets safer, less volatile, and more transparent. Over time, the increased credibility may attract institutional capital, drive tokenization of real-world assets, and help digital assets enter mainstream finance — shifting public perception from speculative instruments to legitimate financial products.

Conclusion: A New Era for Crypto Compliance

The 2025 Digital Assets Framework Bill marks a turning point: crypto platforms are no longer in regulatory limbo — they are being brought under the same legal and compliance standards as traditional financial institutions. While the road to compliance may be arduous for some operators, the long-term benefits — increased trust, institutional participation, and a more stable ecosystem — could be transformative.

If fully implemented, Australia may become a model for other countries looking to balance innovation and investor protection. For investors and platforms alike, the message is clear: the age of crypto compliance has begun.