New AFS licensing regime for digital assets introduced into parliament
The Corporations Amendment (Digital Assets Framework) Bill 2025 (Digital Assets Bill), which establishes a new regulatory framework for businesses that hold or deal with digital assets for customers, has now been introduced into parliament.
The Digital Assets Bill introduces two new financial products into the existing definition of ‘financial product’ in the Corporations Act 2001 (Cth) (Corporations Act):
- digital asset platforms; and
- tokenised custody platforms.
Operators of these platforms will now require an Australian financial services (AFS) licence and will be subject to the core licensing obligations, including:
- The requirement to act efficiently, honestly and fairly
- Prohibitions on misleading and deceptive conduct and unfair contract terms
- A requirement to give customers clear information about how assets are held and what their rights are
- Maintaining strong governance and risk controls
- Providing accessible dispute resolution and compensation if things go wrong.
Why the reforms are happening
The Explanatory Memorandum explains that although some digital asset activities are already regulated under existing financial services law, many custodial arrangements fall outside the current regime. This has created risks relating to insolvency, commingling, misuse of assets, operational failures, fraud and cyber incidents.
The Digital Assets Bill introduces amendments to the Corporations Act to:
- define core concepts around digital tokens, digital asset platforms and tokenised custody platforms;
- apply the financial services law in a way that is tailored to these platforms;
- provide targeted exemptions for certain digital token arrangements; and
- provide ASIC and the Minister with powers to regulate these platforms.
What will be regulated?
The introduction of the definition of ‘digital asset platform’ and ‘tokenised custody platform’ captures the wide variety of arrangements that are often referred to as ‘custodial’ in the digital asset industry. Arrangements that involve a person holding assets on behalf of another as trustee or bailee are captured. So too are arrangements for a client to transfer full title in the underlying assets in return for a contractual right to instruct the operator in relation to how those underlying assets are dealt with.
These definitions do not extend to other types of arrangements as part of traditional securities lending and collateral arrangements that involve total title transfer, such as when a person lends digital tokens to another person or when digital tokens are possessed by a person as collateral to secure an obligation.
What is a platform?
Under the Digital Assets Bill:
- a digital asset platform is a facility under which an operator possesses digital tokens on behalf of clients, whether as trustee, bailee or under contractual arrangements that require the operator to follow client instructions; and
- a tokenised custody platform is a facility under which an operator:
- identifies an underlying asset (other than money);
- creates a single digital token representing the right to redeem or direct the delivery of that asset; and
- holds the underlying asset for or on behalf of the token holder.
Obligation to hold an AFS Licence and exemptions
Under the Digital Assets Bill, a person providing financial services with respect to these products in the course of business must hold an AFSL, subject to exemptions. These include exemptions for small-scale operators with less than $10 million dollars in transaction value across a rolling twelve-month period, and for businesses that deal in or advise on platforms only as an incidental part of a non-financial business.
What obligations will apply
AFS licensees operating digital asset platforms or tokenised custody platforms must comply with both the general obligations under the Corporations Act and new platform-specific requirements. Operators will be required to meet minimum standards set by ASIC covering how client assets are held and how transactions and settlements are conducted. Operators must also provide a platform guide to clients, explaining how the service works, including custody and transfer arrangements, fees and charges, key risks, and client rights.
Next steps
If the Digital Assets Bill is passed, there will be an 18-month transition period following commencement of the reforms.
We will continue to monitor developments and provide updates as the reforms progress. For more information, email cmee@cnmlegal.com.au or amcaliece@cnmlegal.com.au, or call 07 3211 4010.
This paper is produced as general information in summary for clients and should not be relied upon as a substitute for detailed legal advice or as a basis for formulating business or other decisions. CNM Legal asserts copyright over the contents of this document.