Proposed reforms aim to update regulations and strengthen oversight of digital asset platforms 12 min read
After a long period of discussion about potential digital asset reform, the Treasury has released draft legislation—the Treasury Laws Amendment (Regulating Digital Asset, and Tokenised Custody, Platforms) Bill 2025 Exposure Draft (the draft Bill), which aims to update Australia’s financial services regulatory regime, expressly capturing certain key activities within the digital and crypto asset ecosystem. It covers crypto or digital assets custodial services as well as custodial tokenisation activities that may have previously been unregulated—seeking to close regulatory gaps and support innovation in the digital asset sector.
In this Insight, we explore the draft Bill's key concepts, Australia's positioning against leading jurisdictions in the digital assets space, and the pathway to reform. (For further information about regulatory reform affecting the issuance of 'stablecoins', see our companion Insight here.)
Key takeaways
- The draft Bill, released 25 September 2025, would introduce a comprehensive regime for digital asset platforms and tokenised custody platforms, defining core concepts and bringing the platforms under the Corporations Act 2001 (Cth). It focuses on the platforms themselves, regulating custody of digital tokens, rather than the underlying digital assets or tokens.
- In practice, it would require digital asset wallet providers and exchange operators who hold clients' tokens custodially to obtain an Australian financial services licence (AFSL), and comply with the obligations under that licensing regime as well as the tailored obligations this Bill would introduce. Licensees would need to comply with new asset-holding and transactional standards, platform rules and ministerial prohibitions, with breaches attracting civil penalties. The regime would give the Australian Securities and Investments Commission (ASIC) broad powers to supervise and enforce compliance with the new regime.
- Exemptions are likely to be available for small-scale platforms and intermediated staking arrangements, and transitional periods will be provided for existing operators to comply with the new regime. It will also exclude automated or self-executing software arrangements (eg self-hosted digital wallets or deployed smart contracts that take possession of, or transfer, digital assets).
- The new regime will not change the characterisation of whether the underlying digital assets or tokens are themselves financial products, or the obligations of issuers or those providing other services in relation to digital assets or tokens (other than the provision of digital asset platforms or tokenised custody platforms). The existing regime and ASIC's current guidance on these matters will continue to be relevant.
- The reforms seek to align Australia’s approach with global best practice, and position it as a credible jurisdiction for digital asset activity and investment.
Core provisions in the draft Bill
The Federal Government proposes to regulate digital asset platforms and tokenised custody platforms as financial products under the financial services regulatory regime in Chapter 7 of the Corporations Act, subject to some tailored requirements and exemptions intended to close regulatory gaps, protect consumers and ensure market integrity. These reforms will require businesses holding digital assets for clients to comply with the existing Australian financial services regulatory regime, including obtaining an AFSL, meeting minimum conduct standards and providing specific disclosures.
Scope of application and core concepts
The draft Bill proposes to introduce two new kinds of financial products under the Corporations Act, which are focused on activities that involve the possession or control of digital assets (rather than seeking to regulate the assets themselves):
- Digital asset platform (DAP)—to be defined as a non-transferable facility under which a person (the operator) possesses one or more digital tokens (the underlying assets) on trust for, or on behalf of, either another person (the client) or another person nominated by the client; and
- Tokenised custody platform (TCP)—to be defined as a non-transferable facility under which:
- a person (the operator) identifies one or more assets (the underlying assets);
- for each underlying asset, creates a single digital token conferring a right to redeem or direct the delivery of the underlying asset; and
- the operator holds each underlying asset in trust for, or on behalf of, each person who possesses the digital token.
Tokenised custody platforms are not intended to capture 'stablecoins' (tokenised forms of 'money'), which are intended to be captured under separate stored value facility regulatory frameworks.
The draft Bill also defines the following concepts, which support the definitions of digital asset platforms and token custody platforms:
- Digital object: a broad term that includes an electronic record and an intangible thing about which information is recorded in an electronic record.
- Digital token: a type of digital object that one or more persons are capable of controlling (ie can exclude others, use/transfer/dispose, and identify themselves as the controller).
- Control: a person is capable of controlling a digital object if they can exclude others from controlling it; can use, transfer or otherwise dispose of it; and can identify themselves as doing either of these things.
- Possession: a person possesses a digital token if they are capable of controlling the digital object that is the digital token, unless they can only do so with the co-operation of another person who is unilaterally capable of controlling the digital object. Practically, this means that for services that require 'multi-signature' authentication to transact on a digital token, both persons with signing authority would be said to have possession.
Digital tokens may or may not be financial products. However, in determining whether a digital token created under a tokenised custody platform or similar facility is a financial product, the redemption right is to be disregarded. This has the effect of excluding 'wrapped tokens' (where the underlying asset for the token is another digital token) and similar arrangements from being financial products by virtue only of the redemption right. The underlying asset may still be a financial product, though, depending on its features, and a wrapped token could nevertheless be a financial product due to the rights and obligations, other than the redemption right attached to it.
Both digital asset platforms and token custody platforms are custody arrangements. They share the definition 'custodial or depository service' in section 766E of the Corporations Act, holding an asset on trust for, or on behalf of, another person. To account for this overlap, the draft Bill includes provisions that would exclude relevant conduct in providing digital asset platforms and token custody platforms from constituting providing a custodial or depository service. Digital asset platforms and token custody platforms under which the operator does not have discretion as to actions affecting the underlying assets or a client's rights would also be excluded from being managed investment schemes.
Licensing
As digital asset platforms and token custody platforms would be financial products, financial product advice and dealing in relation to them would be financial services, which would ordinarily require their provider to hold an AFSL.
'Dealing', in relation to a digital asset platform or tokenised custody platform, would also include any conduct of a client under the platform after the platform has been issued. This would reduce the utility of relying on the intermediary authorisation exemption to issue digital asset platforms or tokenised custody platforms, as the intermediary authorisation would not cover a client's ongoing conduct under the platform.
Proposed new exemptions from the AFS licensing requirement, specific to digital asset platforms and tokenised custody platforms, include:
- Low-value exemption: an AFSL would not be needed for the issuance of a digital asset platform if:
- no financial products are held under any digital asset platform issued by a member of the operator's closely related group;
- the total market value of transactions through all such platforms in the past 12 months does not exceed $10 million;
- the total entry values of underlying assets under all such platforms for any client does not exceed $5,000; and
- the operator has notified ASIC of its intention to rely on this exemption.
- Insignificant part of business exemption: an AFSL would not be needed for advising another person about the existence of a digital asset platform or tokenised custody platform, or arranging for another person to use such a platform, where doing so is in the ordinary course of one's business and not a significant part of it.
- Public digital token infrastructure: the amendments provide clarity that these types of digital assets are not intended to be caught by the financial services regime.
- Intermediated staking arrangements: such arrangements with the issuer of a digital asset platform would not be a financial product if the issuer of the platform holds an AFSL authorising them to provide financial services relating to the issuance.
The draft Bill also includes provisions that would empower the minister to declare a digital asset platform to be a financial market or clearing and settlement facility, if the platform would be a financial market under s767A(1) of the Corporations Act, or a clearing and settlement facility under s768A(1), but for the digital tokens not being financial products. The minister would also have the power to declare that a digital asset platform is not a financial market or clearing and settlement facility.
Tailored conduct requirements
In addition to the general conduct obligations that apply to AFS licensees, digital asset platform and token custody platform operators would be subject to the following requirements:
- platform rules: to have platform rules that address the matters in proposed s912BG, including the criteria for becoming a client of the platform, ongoing obligations for clients, execution and settlement methods, disclosure obligations for the licensee, methods for determining available underlying assets, and arrangements for depositing or redeeming underlying assets;
- prohibited financial products: to comply with any prohibition in force regarding conduct in relation to a specified financial product through the platform;
- asset holding standards: to comply with asset-holding standards in any legislative instrument made by ASIC for this purpose; and
- transactional and settlement standards: to comply with transactional and settlement standards in any legislative instrument made by ASIC for this purpose.
We anticipate, as the digital asset framework solidifies, the release of subsequent guidance instruments on how operators are expected to adhere to certain conduct expectations with appropriate flexibility.
Disclosure requirements
The PDS disclosure requirements in Part 7.9 of the Corporations Act will not apply to a financial product that is a digital asset platform or tokenised custody platform. The PDS disclosure requirements in Part 7.9, and the disclosure requirements in Parts 6D.2 and 6D.3, also will not apply in relation to an equitable right or interest in a security or another financial product arising because of a holding of (or an offer to hold or arrange for the holding of) the security or other financial product through such a platform. This would prevent the existing definitions of securities and certain other financial products, which deem equitable interests in a security or interest in a managed investment scheme to also be a security/financial product, from frustrating the intention to exempt digital asset platforms and tokenised custody platforms from the prospectus and PDS disclosure requirements.
Instead, the issuer of a digital asset platform or tokenised custody platform to a retail client would be required to provide a 'DAP/TCP Guide'.
The draft Bill contains provisions requiring a DAP/TCP Guide to:
- be written and presented in a clear, concise and effective manner;
- include all information that a person would reasonably require for the purposes of making a decision, as a retail client, whether to become a client of the platform, including all of the information in the proposed new s1020AO; and
- include the other statements prescribed in the proposed s1020AO.
The information required to be included in a DAP/TCP Guide would be similar to, and overlap to a degree with, the information that would have been required to be included in a PDS had the PDS provisions in Part 7.9 applied.
Publicly available information would be able to be referred to, rather than included in, a DAP/TCP Guide—but if it is about significant benefits or risks, a summary would need to be included in the DAP/TCP Guide.
Separately from a DAP/TCP Guide, the issuer of a digital asset platform or tokenised custody platform to retail clients must also prepare and publish the platform's voting policy, covering the exercise of voting or governance rights in relation to underlying assets, and any other assets that are held or possessed through the platform, including all information prescribed in the proposed s1020AQ.
A licensee who issues a digital asset platform or tokenised custody platform would also be required to pass on to clients a copy of communications received in relation to the underlying assets, or any other assets, held or possessed through the platform. Regulations may also be made prescribing disclosure obligations before the acquisition of a particular digital token by way of issue or sale under an instruction a client gives under a digital asset platform or tokenised custody platform.
International alignment
Australia’s draft Bill closely follows the regulatory direction set by the EU (MiCA), Singapore, Hong Kong and the UK, focusing on licensing, consumer protection and platform oversight. In its current form, it avoids the more fragmented approach seen in the US, instead aiming for clarity, predictability and harmonisation with global standards.
Operators must obtain an AFSL, manage conflicts of interest, provide dispute resolution, and meet custody/settlement standards—mirroring requirements in the EU, UK and Singapore. Small-scale platforms and non-financial use cases are exempt, further reflecting the approach of MiCA and Singapore’s Payment Services Act 2019.
The Federal Government has stated its intent to align with international best practice, with a view to implementing a framework that can be adapted as technology and global standards continue to evolve.
The pathway to digital asset reform
Australia’s digital asset reform journey has evolved over the past decade, moving from early tax guidance and initial regulatory reviews to a more comprehensive, risk-based approach. The draft Bill represents the furthest progress to date in implementing a regulatory licensing regime for core custodial activities relating to digital assets.
How does this fit into broader changes in the Australian digital currency and payments space?
After years of consultation papers, reviews and delayed or piecemeal reforms, the draft Bill is a significant step towards a comprehensive legislative proposal to regulate digital asset platforms and custody in Australia.
It marks a shift from patchwork regulation to a more holistic framework, aiming to balance innovation, consumer protection and market integrity.
This move is in parallel with significant shifts in payments reform and regulatory relief relating to the rapid expansion of 'stablecoins'. This provides a dual-pronged approach to providing regulatory clarity in the crypto and digital asset ecosystem. See our companion Insight on stablecoins here.
Subject to the course of the draft Bill, we anticipate further revisions to INFO 225 as the new digital asset framework is gradually implemented.
Actions you can take now
Treasury's consultation is open until 24 October 2025.
If you have any questions about the draft Bill, or would like to discuss its implications or submitting a response to Treasury, please get in touch with any of our team below.