New exposure draft legislation released for the regulation of non-cash payment providers
The Treasury has released exposure draft legislation to establish a new regulatory framework for payment service providers (PSPs), marking a significant step in modernising Australia’s payments regulation. The exposure draft forms part of the Government’s broader payments system modernisation agenda and follows the passage of the Treasury Laws Amendment (Payments System Modernisation) Act 2025 (Cth) and the concurrent consultation on digital asset platform reforms. It is the first draft legislation released following two rounds of consultation on PSP regulation that commenced in June 2023.
Purpose and scope
The reforms are being progressed in two tranches. Tranche 1a, which has now been released, establishes the structural foundations of the new framework by setting out the core definitions, functions and licensing concepts. Tranche 1b is expected to be released for consultation in early 2026 and will address additional licensing obligations, including the safeguarding of payment-related money, licensing exemptions and exclusions, APRA powers, unclaimed monies and a rule-making power for a mandatory ePayments Code.
The reforms are intended to modernise Australia’s payments regulatory framework, ensuring it keeps pace with technological and business model developments while enhancing clarity, consumer protection and financial stability.
Key reforms
The Tranche 1a exposure draft legislation introduces new, activity-based and technology-neutral definitions of payment functions, including:
- Stored value facilities (SVFs) – prepaid instruments and digital wallets holding customer funds.
- Tokenised SVFs – stablecoin-like digital instruments redeemable in a single currency.
- Payment instruments – methods enabling non-cash transfers, such as debit and credit cards.
- Payment initiation, facilitation, and technology and enablement services – covering entities initiating, processing, or enabling transfers between payers and payees.
If enacted, the draft legislation would bring these activities within the Australian Financial Services licensing framework, requiring relevant PSPs to meet conduct, disclosure and dispute-resolution obligations under the Corporations Act 2001 (Cth).
The exposure draft also introduces new disclosure and enforcement measures. Tokenised SVF providers would be required to publish notices of material changes and significant events, along with monthly disclosures of reserve assets and liabilities. The reforms would further empower the Treasurer to set baseline consumer protections across the payments sector through a rule-making power for a mandatory ePayments Code.
A further consultation, covering Tranche 1b, is expected in early 2026 and will address the remaining elements of the framework, including safeguarding payment-related money, licensing exemptions and exclusions, unclaimed monies and transitional arrangements.
Next steps
Consultation on the Tranche 1a exposure draft is now open, with submissions due by 6 November 2025. The Treasury intends to introduce a single legislative package in 2026, consolidating both tranches and establishing the foundation for subsequent reforms under Tranche 2.
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.
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