Australia to Require Licenses for Crypto Exchanges and Custodians

Australia has introduced a draft law that requires crypto exchanges and custody providers to obtain a license similar to traditional financial institutions.

The proposal aims to improve consumer protection and regulatory clarity while supporting innovation. Platforms that fail to comply could face penalties of up to AUD 16.5 million, while low-risk operators may qualify for exemptions under the planned rules.

Australia Seeks Broader Oversight of Digital Assets

The Australian government released a draft law to bring digital asset platforms under the same licensing rules as traditional finance. Assistant Treasurer Daniel Mulino called the measure a key part of the nation’s digital asset strategy, which was announced earlier this year.

Currently, only exchanges trading assets like Bitcoin register with AUSTRAC. The proposal would require crypto platforms to hold an Australian Financial Services License (AFSL) supervised by the Australian Securities and Investments Commission (ASIC).

Officials expect this step to improve transparency and build consumer confidence while aligning crypto operations with established financial standards.

Targeted Rules and Strong Penalties

The legislation sets specific requirements for wrapped tokens, staking, and token infrastructure. Exchanges must follow rules for secure custody, settlement, and disclosure. Regulators can fine violators up to $10.8 million (AUD 16.5 million) either by benefit gained or as a share of annual revenue.

Low-risk platforms—those holding under $3300 (AUD 5,000) per customer and processing less than ＄6.6 million (AUD 10 million) each year—may qualify for exemptions. Treasury officials said these thresholds match practices for other financial products and will avoid burdening smaller firms.

Mulino stressed that the reforms aim to protect investors and formalize best practices without blocking innovation. He noted that recent market failures exposed weaknesses where client funds lacked safeguards. Licensing exchanges and custodians should reduce risks, discourage bad actors, and provide clearer legal certainty for compliant operators.

Industry stakeholders can submit feedback before the law moves to parliament. Crypto companies and investors will watch closely to see how the rules influence market growth and digital asset security in Australia.