New AFS licensing regime to digital assets takes next step towards implementation

The Senate Economics Legislation Committee (Committee) has endorsed the Corporations Amendment (Digital Assets Framework) Bill 2025 (Digital Assets Bill), which is formal regulatory regime for digital asset platforms.

Overview of the proposed framework

As previously discussed in our article about the introduction of the Digital Assets Bill into Parliament (see link here), the Digital Assets Bill adopts an activity-based approach, bringing certain digital asset services within the existing financial services regime. Rather than regulating digital tokens as a standalone asset class, the framework focuses on the entities that hold, control or facilitate transactions in those assets.

The framework is supported by new statutory concepts, including ‘digital token’, ‘factual control’ and ‘possession’, which are central to determining when licensing obligations are triggered. In addition to existing Australian financial services (AFS) licensee obligations, operators will be subject to platform-specific requirements relating to custody, client asset protection and operational controls. A limited exemption is proposed where activity falls below a prescribed transaction threshold.

Regulatory architecture and implementation

A key feature of the regime is the conferral of broad powers on ASIC to make legislative instruments governing asset custody, transaction execution and related operational matters. These standards are expected to define much of the practical compliance burden and will be critical to how the regime operates in practice.

The Digital Assets Bill also introduces a tailored disclosure framework, replacing traditional product disclosure requirements with a platform-specific guide to be provided to retail clients.

Transitional arrangements provide for a six-month period following commencement, during which existing operators may continue operating while applying for an AFS licence or licence variation, allowing time to implement the new requirements

Key issues raised in the Senate report

Submissions to the Committee raised issues regarding the breadth and ambiguity of key concepts such as ‘factual control’ and ‘possession’, which may be difficult to apply in decentralised or multi-party arrangements. There is also a risk that entities not intended to be regulated, including certain technology providers or infrastructure participants, could fall within scope.

Submissions also highlighted potential overlap with existing financial services, custody and market infrastructure regimes, creating a risk of duplication if not carefully calibrated. A consistent theme is the extent to which the framework relies on future ASIC rule-making. While this provides flexibility, it also introduces uncertainty, as many substantive requirements will be determined post-enactment. In addition, stakeholders emphasised the need to maintain alignment with international approaches to avoid adverse impacts on competitiveness and market access.

Implications for industry

If enacted, the Digital Assets Bill will have significant implications for participants in the digital asset sector. Operators will need to assess whether their activities fall within the scope of digital asset platform or tokenised custody platform services and, if so, prepare to obtain an AFS licence unless an exemption applies. This is likely to require a review of governance arrangements, custody models, operational processes and compliance frameworks.

While the legislative framework is now largely settled, its practical impact will depend on how the remaining areas of uncertainty are addressed through implementation and regulatory guidance.

For further information about how these changes may impact you, please contact Chris Mee at cmee@cnmlegal.com.au or Jessica Bauers at jbauers@cnmlegal.com.au, or call 07 3211 4010.

This article 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 article.