Tokenised Custody Platforms & The New AFSL Category For Digital Assets

Introduction

The Australian government has introduced the landmark Corporations Amendment (Digital Assets Framework) Bill 2025 (Cth), establishing a new licensing regime for the digital assets sector. This draft legislation creates a specific Australian Financial Services Licence (AFSL) category for “Tokenised Custody Platforms” (TCPs), officially moving platforms that tokenise real-world assets like gold and property from a regulatory grey area into a formal financial services framework.

For operators of these Real World Asset (RWA) platforms, this new regime introduces significant compliance obligations focused on the custody of the underlying assets, rather than just the digital token, including the importance of maintaining and demonstrating organisational competence. This guide provides essential information on the new AFSL category, explaining the specific requirements for TCPs to help issuers navigate the transition to a regulated environment designed to enhance consumer protection and market integrity.

Defining Tokenised Custody Platforms For RWA Platforms

TCP Definition Per the 2025 Draft Bill

Under the Corporations Amendment (Digital Assets Framework) Bill 2025 (Cth), a Tokenised Custody Platform (TCP) is defined as a specific type of financial product. It is classified as a non-transferable facility where an operator performs several key functions:

Key Function	Description / Example
Identify Underlying Assets	The operator selects tangible (e.g., gold bullion) or intangible (e.g., shares) assets for tokenisation.
Create Unique Digital Token per Asset	Each asset is represented by a single, unique digital token.
Token Grants Redemption Rights	Holding the token allows the holder to redeem or direct delivery of the asset.
Hold Asset on Trust for Token Holder	The operator must legally hold the asset on trust for the digital token holder.

One-to-One Token & Asset Relationship

A defining characteristic of a TCP is the strict one-to-one relationship mandated between a digital token and its underlying asset. This means that for every single token issued by the platform, there must be a corresponding, whole, and identifiable real-world asset held in custody.

The framework does not facilitate the issuance of fractionalised interests in underlying assets. If a platform were to fractionalise an asset, such as dividing ownership of a single piece of real estate among multiple tokens, the arrangement would generally fall outside the TCP definition.

Instead, such an arrangement would likely be classified as a Managed Investment Scheme (MIS). This distinction is critical, as an MIS is subject to a different and often more complex set of regulatory obligations under the Corporations Act 2001 (Cth).

TCPs vs. Standard Digital Asset Platforms

It is important to differentiate between a TCP and a Digital Asset Platform (DAP), as they are treated as separate financial products under the new licensing regime. The primary distinction lies in the type of asset being held in custody.

A DAP is a facility where an operator holds or possesses existing crypto-digital assets, assets, such as:

• Cryptocurrencies like Bitcoin
• Other digital tokens

These assets are held on behalf of clients. In contrast, a TCP is defined by its function of holding physical or intangible real-world assets and creating new digital tokens to represent them.

Therefore, while a DAP custodies assets that are already digital, a TCP creates a digital representation of a non-digital asset it holds in custody.

Holding Requirement & Double Custody Challenge

Holding Assets on Trust

Under the proposed framework, a central obligation for a TCP operator is to hold the underlying assets on trust for, or on behalf of, the person who possesses the digital token. This legal requirement ensures that the assets are legally separated from the platform’s own company funds.

This trust structure is a critical consumer protection measure. In the event of the platform’s insolvency, the physical assets—such as gold bullion or property deeds—belong to the token holders and are not available to the platform’s liquidators.

The arrangement captures any situation where a person holds assets for another as a trustee or bailee, providing a clear legal distinction between client property and company property.

Managing Physical & Digital Custody

Operators of TCPs face a unique operational challenge known as the “Double Custody” problem. This burden requires the simultaneous management and security of two distinct types of assets: the physical asset and its crypto-digital assets representation.

This dual responsibility is a core feature of the TCP licensing regime and creates two separate but equally important security obligations for the platform, including the need to address ASIC cyber resilience and cybersecurity risk management:

Custody Type	Security Focus & Examples
Physical Custody	Secure storage of real-world assets (e.g., gold in a vault, property deeds in safekeeping).
Digital Custody	Protection of blockchain infrastructure, digital ledgers, and private keys controlling token issuance and transfer.

A failure in either physical or digital security could lead to a breach of the operator’s licensing obligations and significant losses for consumers.

Navigating the Dual Audit Burden

The “Double Custody” requirement directly leads to a dual audit burden for platform operators. To comply with their AFSL obligations, operators must be able to prove the integrity of both their physical and digital custody arrangements through separate and rigorous audit tracks.

This ensures that the digital tokens accurately represent the underlying assets at all times. Auditors will need to conduct two distinct verification processes:

Audit Track	Purpose & Scope
Physical Asset Audit	Confirms existence, quantity, and secure storage of underlying assets.
Digital Ledger Audit	Verifies total token supply and system security against hacks or unauthorised issuance.

A key part of this process is the regular reconciliation between the physical holdings and the digital token records to prove a one-to-one backing, as required under the B5 financial requirements for AFSL.

Financial Requirements & NTA Obligations For Issuers

Net Tangible Asset (NTA) Requirements for Custodial Providers

Operating a TCP under the new AFSL regime involves significantly higher financial obligations than a standard advice licence. Because TCPs are classified as custodial providers, they are subject to strict Net Tangible Asset (NTA) requirements designed to ensure they have an adequate financial buffer. These prudential thresholds reflect the heightened risks associated with holding client assets.

The proposed NTA requirements for these digital asset platforms are calibrated based on how custody is managed, in accordance with AFSL compliance regulation:

Custody Arrangement	Net Tangible Asset (NTA) Requirement
Direct Custody	At least $5 million in NTA
Use of Sub-custodian	0.5% of the total value of assets held by the facility

These thresholds are substantially higher than those for typical advisory licensees. They also align TCPs more closely with traditional custodians, who can face NTA requirements of up to $10 million. This ensures that as a platform’s operational risk grows, its financial resources increase proportionately.

Liquidity & Solvency Expectations

Beyond the total NTA value, TCP operators must also meet specific liquidity and solvency standards. A significant portion of the required capital must be held in liquid assets to ensure the platform can be wound down in an orderly manner if necessary, without freezing client assets.

This is a critical consumer protection measure within the new digital assets framework. To meet these expectations, operators must:

Liquidity Requirement	Details
Minimum Cash/Cash Equivalents	At least 50% of required NTA must be held in cash or cash equivalents.
Other Liquid Assets	Remaining NTA in assets convertible to cash within six months.

This ensures the platform has sufficient cash flow to manage its obligations and protect token holders even during periods of operational stress, in line with financial requirement obligations as an AFS licensee.

Minimum Holding Standards & Liability For Real World Assets

Maintaining a 100% Reserve Ratio

A cornerstone of the proposed digital assets framework is the strict enforcement of “Minimum Holding Standards” for TCPs. This mandates that the assets held in custody must always be sufficient to meet the claims of all token holders, effectively establishing a 100% reserve ratio. As a result, every digital token is directly and fully supported by a corresponding real-world asset.

This requirement is legally grounded in the trust structure that defines a TCP, where the operator holds the underlying assets on behalf of the token holders. Consequently, operators are prohibited from engaging in fractional reserve practices. For example, a platform cannot issue tokens representing 100 kilograms of gold if it only holds 90 kilograms in its vault.

The framework also strictly forbids the re-hypothecation of assets. This means operators cannot:

• Lend out the underlying assets
• Use the assets as collateral for their purposes

These measures ensure that assets remain unencumbered and available for redemption at all times.

Operator Liability for Physical Asset Loss or Damage

Unlike standard digital asset platforms that primarily facilitate trading, TCP operators are positioned as custodians and are therefore subject to direct liability for the underlying physical assets. This means the operator is legally responsible if a real-world asset is lost, stolen, or damaged, creating a significant layer of consumer protection. This liability arises directly from the operator’s duty to hold assets in trust for the token holders.

This strict liability applies even when the physical custody of the asset is outsourced to a third-party provider, such as a secure vault or specialised storage facility, as part of the operator’s AFSL compliance obligations. For instance, if a fire destroys a warehouse holding tokenised commodities, or if gold bullion is stolen from a vault, the TCP operator—not just the storage provider—is held liable to the token holders.

The operator retains primary responsibility for safeguarding the assets and cannot transfer this core obligation.

Insurance Implications for Tokenised Assets

The significant liability associated with holding physical assets makes comprehensive insurance an essential operational and regulatory requirement for any TCP, as outlined in ASIC professional standards for AFSL holders.

The insurance coverage must be robust enough to cover the full value of all underlying assets, ensuring that token holders can be compensated in the event of a loss. This requirement is a critical component of the risk management framework that ASIC will expect licensees to maintain.

To adequately address the dual nature of their operations, TCPs will need a multi-faceted insurance strategy as part of their risk management framework that typically includes:

Insurance Type	Coverage Focus & Examples
Specie Insurance	Covers high-value physical assets (e.g., gold, fine art) against theft, loss, or physical damage.
Cyber Liability Insurance	Protects against losses from cyber-attacks, hacking, smart contract vulnerabilities, or theft of private keys.
Professional Indemnity Insurance	Covers claims of negligence, errors, or omissions in professional services that cause client financial loss.

Compulsory Redress & Consumer Protection Measures

Mandatory Membership: Australian Financial Complaints Authority

A significant consumer protection measure under the new digital assets framework is the compulsory membership of the Australian Financial Complaints Authority (AFCA) for all TCP license holders.

This requirement ensures that retail clients have access to an independent and binding dispute resolution scheme if they have a complaint against a platform operator, aligning TCPs with other providers of financial services in Australia.

This obligation means that if a token holder has an issue, such as described in the AFSL holder’s guide to Australian Financial Complaints Authority (AFCA) membership:

• A problem with redeeming an asset
• A dispute over fees

they can lodge a complaint with AFCA at no cost. If the dispute cannot be resolved directly with the platform, AFCA can determine that is binding on the financial firm. This provides an accessible pathway for redress and compensation if things go wrong, without the need for expensive court proceedings.

Platform Guide & Platform Rules

To ensure transparency, operators of TCPs are required to provide clients with specific disclosure documents. Instead of a traditional Product Disclosure Statement (PDS), TCPs must issue a “Platform Guide.”

This tailored document must be written in a clear and concise manner, providing all the information a retail client would reasonably need to make an informed decision.

The Platform Guide must explain how the service works, including crucial details about:

Disclosure Topic	Description / What Must Be Covered
Custody & Transfer Arrangements	How underlying assets are held and transferred.
Fees & Charges	All costs associated with using the platform.
Key Risks	Main risks clients should know when using the service.
Client Rights & Obligations	Legal rights and responsibilities of the client under the platform rules.

In addition to the guide, operators must establish and maintain “Platform Rules.” These rules function as a contract between the platform and its clients, outlining the terms of use, client eligibility, and procedures for transactions and settlements. This ensures that all parties clearly understand their responsibilities and the operational framework of the platform.

Conclusion

The Corporations Amendment (Digital Assets Framework) Bill 2025 (Cth) introduces a landmark licensing regime for TCPs, shifting the focus for RWA issuers to a custody-centric compliance model. This new framework imposes significant obligations, including stringent NTA requirements, a mandatory 100% reserve ratio for underlying assets, and compulsory membership with AFCA.

To navigate this complex transition and turn these regulatory challenges into strategic opportunities, contact AFSL House’s specialised AFSL application lawyers for tailored compliance frameworks and expert AFSL compliance guidance. Our team is dedicated to ensuring your platform is fully prepared for these new obligations.

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