A Guide to Australia’s Crypto Laws & Digital Asset Platform Reforms

Introduction

Australia’s crypto and digital asset sector is facing its most significant regulatory shift to date with the proposed 2025 reforms. The Australian Government has released exposure draft legislation that aims to bring “Digital Asset Platforms” (DAPs) and “Tokenised Custody Platforms” (TCPs) under the existing Australian financial services framework, marking a pivotal change for the industry. This move is designed to close regulatory gaps, enhance consumer protection, and align the crypto sector with the established standards of the Corporations Act 2001 (Cth).

For Australian crypto founders, these changes represent more than just new compliance hurdles; they are a fundamental reshaping of the market. This guide provides a clear, practical breakdown of the proposed legislation, translating complex legal reforms into actionable business strategy. It offers essential information to help early-stage crypto and payments businesses understand the new Australian Financial Services Licence (AFSL) requirements, assess their obligations, and navigate the path to compliance.

Defining Digital Asset Platforms in the 2025 Reforms

Defining Digital Asset Platforms & Tokenised Custody Platforms

The draft legislation amends the Corporations Act 2001 (Cth) by introducing two new categories of financial products, which are technologically neutral to adapt as new forms of tokenisation emerge. These new products are DAPs and TCPs.

A DAP is defined as a non-transferable facility where an operator possesses one or more digital tokens on behalf of a client. This definition encompasses various business models, including:

• Multilateral trading platforms that facilitate the exchange of digital tokens between clients
• Brokerage platforms where operators execute trades on behalf of their clients
• Market-making platforms where operators buy or sell digital tokens from their inventory
• Wallet and custody platforms that store and safeguard clients’ digital tokens
• Staking platforms where operators use client tokens to participate in network maintenance and share the rewards

A TCP, on the other hand, is a facility where an operator takes an underlying asset, creates a unique digital token representing the right to that asset, and holds the underlying asset in trust for the token holder. It’s important to note that TCPs are not intended to regulate stablecoins, which will be covered by a separate stored value facility framework.

Examples of TCPs include platforms that facilitate:

• Tokenised physical assets, such as holding gold bullion and issuing tokens that represent ownership
• Tokenised intangible assets, like holding shares or bonds and creating tokens to identify the owners
• Bridging and wrapping services, where an operator holds a token on one network and issues a new, representative token on a different network

Understanding Core Concepts of Possession & Control

The proposed regulations for digital assets are anchored in the concepts of possession and control, which determine whether a platform is providing a custodial service. Rather than defining “digital asset” itself, the draft legislation focuses on the activities surrounding “digital tokens” and “digital objects.”

A digital object is a broad term that includes an electronic record or an intangible item about which information is recorded electronically. Building on this foundation, a digital token is a specific type of digital object that one or more persons are capable of controlling.

The definition of control is based on factual ability rather than legal right. A person is considered to have control over a digital object if they can:

• Exclude others from controlling it
• Use, transfer, or otherwise dispose of it
• Identify themselves as the person capable of performing either of these actions

Finally, a person has possession of a digital token if they are capable of controlling it. This concept is crucial for services that use multi-signature authentication. In such arrangements, if cooperation from another person is required to transact, both individuals with signing authority are considered to have possession of the digital token.

New AFSL Requirements for Crypto & Custody Platforms

The Mandate for an AFSL

Under the proposed 2025 reforms, operating a DAP or a TCP will be classified as providing a financial service, which is the primary trigger when asking do I need an Australian Financial Services Licence (AFSL)? This change brings these platforms under Chapter 7 of the Corporations Act 2001 (Cth), triggering the requirement for operators to obtain an AFSL.

Consequently, any person advising on, dealing in, or arranging for others to use these platforms will also be considered to be providing financial services, often requiring guidance from specialised AFSL lawyers to ensure they hold the correct licence.

Holding an AFSL imposes several general conduct obligations on crypto businesses:

• Licensees must ensure they provide their financial services efficiently, honestly, and fairly
• They are required to maintain adequate risk management systems
• They must manage conflicts of interest
• They need to establish dispute resolution procedures to protect consumers

Tailored Obligations for Your Australian Crypto Business

In addition to the general duties of an AFSL holder, the draft legislation introduces a set of new, tailored obligations specifically for licensed DAP and TCP operators. These requirements are designed to address the unique risks associated with the crypto sector and enhance consumer protection.

Key tailored obligations for your Australian crypto business include:

Obligation	Description & Key Requirements
Platform Rules	You must establish and maintain a binding contract with clients covering: the criteria for becoming a client, ongoing client obligations, methods for executing and settling transactions, and arrangements for depositing or redeeming underlying assets.
Asset Holding Standards	Licensed platforms must comply with minimum standards set by ASIC governing how client assets are possessed and safeguarded, along with requirements for record-keeping and reconciliation.
Transactional and Settlement Standards	Operators must adhere to ASIC-set standards for transaction and settlement functions, including rules on facilitating asset acquisitions/disposals and handling client instructions.
New Disclosure Documents	Instead of a PDS, you must provide retail clients with a ‘DAP/TCP Guide’ explaining the platform’s operations, fees, risks, and client rights. You must also publish a voting policy detailing how governance rights are handled.
Compliance with Prohibitions	Licensees are required to comply with any ministerial prohibitions that may be put in force regarding conduct related to a specified financial product offered through the platform.

Proposed Exemptions from the New Crypto Regulation

The Low-Value Exemption for Small Australian Crypto Businesses

The draft legislation includes a low-value exemption to relieve smaller digital asset platforms from the full AFSL requirement. This exemption is designed for low-risk platforms, but operators must meet several strict conditions to qualify.

If a business intends to rely on this exemption, it is required to notify ASIC.

To be eligible for the low-value exemption, a digital asset platform operator must satisfy all the following criteria:

Criterion	Requirement / Limit
Client Holding Limit	The total value of assets held for any single client must not exceed $5,000.
Annual Transaction Limit	The total market value of all transactions facilitated through the platform over the past 12 months must not exceed $10 million.
No Financial Products	The platform, or any platform within the operator’s corporate group, must not hold any assets that are classified as financial products under the Corporations Act 2001 (Cth).

Other Key Exclusions for Staking & Public Infrastructure

The proposed reforms introduce many other important carve-outs to provide regulatory clarity for specific activities and business models within the crypto sector. These exclusions are intended to ensure the new laws target custodial risks without unnecessarily capturing non-financial activities or decentralised infrastructure.

One key exclusion applies to intermediated staking arrangements. Such an arrangement will not be classified as a separate financial product if it:

• Is offered through a licensed DAP
• Meets certain conditions where the operator is authorised to use the client’s digital tokens for staking
• Ensures any rewards earned, after deducting fees, are passed on to the client

Another significant carve-out is for public digital token infrastructure. This exemption provides greater comfort to miners and node operators involved in securing blockchain networks.

It applies to systems that meet the following conditions:

• The infrastructure is used for transmitting, processing, or recording data related to digital tokens.
• It operates with decentralised control, where no single person or group can unilaterally control the digital tokens.
• Anyone can contribute to the system’s integrity without needing permission.
• The rules governing the infrastructure are immutable.

The draft legislation also includes an “insignificant part of business” exemption. This applies to businesses whose involvement with DAPs or TCPs is merely incidental to their primary, non-financial operations. For instance, a coffee shop that allows customers to make payments by transferring assets to a digital wallet would not be required to hold an AFSL, as this activity is not a significant part of its business.

Practical Next Steps for Australian Crypto Founders

Assess Your Business Model & Exemption Eligibility

The first practical step for any Australian crypto founder is to thoroughly assess your business operations against the new definitions of a DAP and a TCP. The critical factor is whether your platform takes “possession” or “control” of a client’s digital tokens. If your business model involves holding crypto on behalf of users, the proposed reforms likely capture it.

Once you have analysed your model, the next step is to determine if you qualify for an exemption. The most significant carve-out is the low-value exemption, which is available if your platform meets all the following conditions:

Exemption Condition	Threshold / Rule
Client Asset Value	The total value of assets held for any single client does not exceed $5,000.
Annual Transaction Value	The total market value of all transactions facilitated over the past 12 months is less than $10 million.
Asset Type Restriction	No financial products, as defined under the Corporations Act 2001 (Cth), are held under any digital asset platform operated by your corporate group.

If you plan to rely on this exemption, you must formally notify ASIC. Additionally, you should consider whether other exclusions might apply to your activities, such as:

• The “insignificant part of business” exemption
• Public digital token infrastructure exemptions

Prepare for the AFSL Application & New Disclosures

If your crypto business does not qualify for an exemption, you will need to prepare to obtain an AFSL. This process requires significant preparation and an in-depth understanding of the new, tailored obligations for the crypto sector.

A key part of this preparation involves drafting the required disclosure documents, which are some essential documents for your AFSL application. Instead of a traditional PDS, you will need to create and provide retail clients with a ‘DAP/TCP Guide’. This document must clearly explain:

• The platform’s operations
• Fee structures
• Associated risks
• Rights available to clients

Additionally, you must establish and maintain a set of ‘Platform Rules’, which will function as a binding contract with your clients. These rules need to cover essential operational details, including:

• The criteria for becoming a client.
• Ongoing obligations for clients using the platform.
• The methods for executing and settling transactions.
• Arrangements for depositing or redeeming any underlying assets.

Finally, you will also be required to prepare and publish the platform’s voting policy. This document must detail how any voting or governance rights related to the underlying digital assets held on the platform are managed and exercised.

Conclusion

Australia’s proposed 2025 crypto reforms will bring DAPs under the Corporations Act 2001 (Cth), requiring many to obtain an AFSL and comply with new tailored obligations. For founders, navigating this new landscape involves assessing your business model against the new definitions, determining eligibility for exemptions, and preparing for the comprehensive AFSL application process.

To ensure your crypto business is prepared for these significant changes and can turn regulatory challenges into strategic opportunities, contact our AFSL compliance experts at AFSL House. Our team offers trusted expertise in AFSL applications and can provide a tailored compliance framework to help you navigate the path to compliance with confidence.

Frequently Asked Questions (FAQ)