Australian Government Proposes Comprehensive Digital Asset Licensing and Custody Framework ∞ Regulation

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Briefing

The Australian Government has released draft legislation to integrate digital asset intermediaries into the existing financial services framework. This action fundamentally shifts the compliance burden by applying the principle of “same activity, same risk, same regulation,” mandating that crypto-asset service providers adopt the rigorous obligations of traditional finance, including design and distribution requirements. The most critical structural change is the proposal of two new regulated financial products ∞ the “digital asset platform” and the “tokenised custody platform”.

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Context

Prior to this draft legislation, the digital asset sector in Australia operated under a patchwork of existing laws, leading to significant legal uncertainty regarding asset classification and operational requirements for crypto intermediaries. The prevailing challenge was the lack of a cohesive, risk-based framework, forcing businesses to navigate ambiguous interpretations of financial services law, particularly around custody and investment scheme regulations. This uncertainty hindered institutional adoption and created a regulatory arbitrage risk.

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Analysis

The legislation alters the operational system by mandating that licensed entities comply with asset holding standards and platform rules, directly impacting custody and security protocols. For regulated entities, the cause-and-effect chain is clear ∞ to operate, they must secure a license for the newly defined “digital asset platform” or “tokenised custody platform,” triggering comprehensive compliance obligations under financial services law. This is a critical update because it forces a complete architectural overhaul of internal Governance, Risk, and Compliance (GRC) frameworks to meet the rigor of traditional finance standards. The exemptions provided for core blockchain infrastructure and certain intermediated staking arrangements offer targeted clarity, which is essential for preserving innovation while enforcing consumer protection.

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Parameters

Two New Financial Products ∞ “Digital asset platform” and “tokenised custody platform” are the newly defined regulated entities.
Regulatory Principle ∞ The foundational principle guiding the legislation is “same activity, same risk, same regulation”.
Compliance Obligations ∞ Licensees must comply with design and distribution obligations.

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Outlook

The release of this draft legislation initiates a critical consultation period that will determine the final scope and implementation timeline of the new framework. This action sets a significant precedent for other jurisdictions considering how to regulate crypto intermediaries without creating entirely new regulatory bodies, potentially accelerating a global trend toward integrated financial services regulation. Future litigation will likely center on the precise application of existing financial services laws to novel digital asset business models, particularly staking and DeFi-related activities.

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Verdict

Australia’s draft law establishes a high-bar, integrated regulatory model that will professionalize the digital asset sector by subjecting intermediaries to the full rigor of established financial services compliance.

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