Australia Cracks Down: Crypto Exchanges and Custodians Face New Licensing Mandate

Australia slaps regulatory handcuffs on crypto platforms—exchanges and custodians now need licenses to operate.

The Compliance Hammer Drops

Treasury officials greenlight sweeping reforms that force digital asset intermediaries into the same regulatory framework as traditional finance players. No more wild west operations—exchanges must prove solvency while custodians demonstrate secure storage protocols.

Industry players scramble to meet capital requirements and compliance checks. Some smaller platforms face existential threats as compliance costs skyrocket. Meanwhile, established players welcome the clarity—predicting institutional money will flood in once regulatory uncertainty clears.

Investors get promised protection from exchange collapses and custody failures. The government pitches this as consumer safeguards meeting innovation—though cynics note it's mainly about capturing tax revenue from an industry that's been operating in regulatory gray areas for years.

Australia joins global regulators racing to tame crypto's frontier spirit. The move signals maturation—but also imposes traditional finance's paperwork burden on an industry built on bypassing middlemen. Because nothing says 'innovation' like requiring three forms of ID and a notarized application just to hold your own assets.

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.