Australia's encryption regulatory heavyweight legislation: $24 billion in productivity dividends can be released annually.

The Australian government has officially submitted the Companies Amendment (Digital Assets Framework) Bill 2025, establishing the country's first comprehensive regulatory framework for cryptocurrency exchanges and custody platforms. The new regulations require crypto businesses to hold an Australian Financial Services License (AFSL) and be subject to the oversight of the Australian Securities and Investments Commission (ASIC), while providing a transition period of 18 months for compliant businesses. Treasurer Jim Chalmers stated that the bill, while strengthening investor protection, is expected to release an annual productivity gain of $24 billion, marking the beginning of a new era in Australia’s crypto regulation.

Core of the Legislative Framework: AFSL License and Dual Category Regulatory System

The digital asset regulatory bill introduced by the Australian government fundamentally reshapes the compliance landscape of the crypto industry. The bill clearly stipulates for the first time that all exchanges and custody service providers holding crypto assets for clients must apply for an Australian Financial Services License, which will formally bring them under the regulatory scope of ASIC. Treasurer Jim Chalmers and Minister for Financial Services Daniel Mulino emphasized in a joint statement, “We take the Australian crypto industry seriously,” while noting that blockchain and digital assets present significant opportunities for the economy, financial sector, and business entities.

The bill will bring all crypto assets and blockchain companies into the financial system to ensure they comply with transparency, integrity, and consumer protection standards applicable across the industry. The joint statement noted: “Australia is expected to unlock $24 billion per year by unleashing the potential of digital financial innovation, improving productivity, and saving costs.”

The bill innovatively introduces two brand new license categories – “digital asset platform” and “tokenized custody platform”, reflecting the different roles that businesses play in holding and transferring client funds. Mulino specifically noted that the reform targets businesses that control client assets rather than the underlying technology, and warned that “currently, businesses can hold unlimited amounts of client crypto assets without any financial legal safeguards.” This precise regulatory positioning both acknowledges the principle of technological neutrality and ensures risk control at key points.

From a regulatory perspective, Australia has taken a path similar to that of the UK's Financial Conduct Authority (FCA), but has added features more suited to the local market. Compared to Singapore's Payment Services Act (PSA) system, Australia's AFSL requirements are stricter, particularly in terms of capital adequacy and risk management systems. This high standard reflects the Australian government's regulatory philosophy of seeking a balance between protecting investors and promoting industry development.

Key Provisions of Australia's Crypto Regulation Bill

License Requirements

• Mandatory holding of AFSL license
• Accept continuous supervision of ASIC
• Two types of new licenses: digital asset platform, tokenized accomplice platform

Exemption Conditions

• Small operators with an annual trading volume of less than 10 million AUD (approximately 6.5 million USD)
• Encryption activities and occasional enterprises of non-financial services

Transition Arrangement

• 18 months compliance grace period
• Must submit service guide disclosing fees and risks

Law Enforcement Measures

• Impose strict penalties for violations
• ASIC has the right to delist non-compliant platforms

Regulatory Tiering and Transitional Arrangements Reflect Pragmatic Considerations

The bill demonstrates the pragmatic attitude of Australian regulators, setting differentiated requirements for businesses of different sizes. Small operators with an annual transaction volume of less than 10 million AUD (approximately 6.5 million USD) can be exempted, while those whose crypto activities are only ancillary to non-financial services are also not within the licensing scope. This tiered regulatory approach not only alleviates the compliance burden on startups but also ensures that major risk points are adequately covered, contrasting sharply with the complex system of money transmission licenses (MTL) in the United States.

The 18-month transition period is particularly critical as it provides existing businesses with ample preparation time to complete license applications and system transformations. Mulino clearly stated that this arrangement aims to provide compliant enterprises with a smooth transition space. Considering that the Australian crypto market is currently dominated by several mainstream CEXs, most of which have already established a certain level of compliance foundation, the transition period will help them further improve their risk control systems rather than starting from scratch.

The service guideline requirements are another noteworthy institutional innovation. The platform must clearly disclose the fee structure, risk factors, and asset management system to customers, and this transparency obligation is similar to the prospectus requirements in the traditional financial sector. From the perspective of investor protection, this will significantly improve the current situation of information asymmetry in the crypto market, helping users make more informed decisions. At the same time, a unified information disclosure standard also provides a clear basis for subsequent regulatory enforcement.

In-depth Analysis of Political Processes and Industry Impact

The bill has currently passed the first reading in Parliament and immediately entered the second reading stage, reflecting the government's urgent attitude towards the passage of the legislation. In the House of Representatives, the Labor Party, led by Prime Minister Anthony Albanese, is expected to easily secure the passage of the bill with a stable majority of seats, while the real challenge will arise in the Senate, where the Labor Party may need to seek the support of independent members and opposition legislators to ultimately pass the reform proposal.

The Australian crypto industry has shown a cautiously welcoming attitude towards the bill. Although there is a general recognition of the value of regulatory clarity, several parties have called for simplified rules and clearer definitions. In particular, regarding key concepts such as “digital asset” and “control of customer assets”, the industry hopes for more specific guidance. This feedback reflects the industry's demand for regulatory predictability and also suggests that the formulation of subsequent implementation regulations will be crucial.

From the perspective of market structure, the new regulations may accelerate the industry consolidation process. Large international exchanges have significant advantages in applying for AFSL due to their rich Compliance experience and resource reserves, while small local operators face higher Compliance costs. This trend may lead to an increase in market concentration, but it also creates differentiated competitive opportunities for specialized service providers focusing on specific niche areas.

Australia's Path Choices Under Global Regulatory Trends

Australia's recent legislation is an important part of the global wave of encryption regulation, but its path is uniquely characterized. Unlike the United States, which regulates through enforcement, and the European Union, which implements comprehensive legislation through the MiCA framework, Australia has taken a middle path—neither simply engaging in “whack-a-mole” enforcement nor applying uniform rules across the board, but rather focusing on the two key aspects of custody and trading.

From the perspective of regulatory philosophy, the Australian model reflects a tradition of pragmatism. The legislation clearly distinguishes between the technology itself and its application, imposing licensing requirements only on businesses that control customer assets, while not interfering with the development and deployment of the underlying blockchain protocols. This approach not only avoids the potential suppression of technological innovation due to excessive regulation but also ensures that core concerns of financial stability and consumer protection are met.

ASIC's law enforcement records provide confidence in the effectiveness of the new regulations. Since July 2023, the agency has taken down over 14,000 scam and phishing websites, with crypto-related fraud accounting for 20% of the total clean-up. This proactive law enforcement stance, combined with the upcoming new regulations, is expected to significantly enhance the safety and compliance of Australia's crypto market, clearing obstacles for large-scale institutional capital influx.

New Paradigm of Encryption Regulation and Competitive Landscape in Asia-Pacific

The introduction of the Australian Crypto Custody Bill not only marks the maturity of digital asset regulation in the country but also represents another important exploration in the field of encryption governance in the Asia-Pacific region. With financial centers such as Hong Kong, Singapore, and Japan successively establishing their own encryption regulatory frameworks, Australia's legislation further enriches regional experience and contributes key elements to the formation of coordinated and mutually recognized regulatory standards. For the crypto industry, a clear and consistent regulatory environment is more conducive to healthy development than tax incentives or subsidies, and Australia’s move is a substantial step towards this goal. As the bill progresses through the parliamentary process, the global crypto community will closely monitor the effectiveness of this regulatory experiment, which is likely to become a model case for medium-sized economies to balance innovation and risk.