Federal Government sets out proposals for driving innovation in Australia's digital asset industry

Digital assets are a rapidly evolving part of the economy. While they offer new opportunities and benefits for Australia, they also make the management of risk and consumer protection an increasingly critical concern. On 21 March 2025, the Australian Government released its "Statement on Developing an Innovative Australian Digital Asset Industry", outlining the Labor Government’s plans for reforming the digital asset landscape, its progress to date and workplan going forward.

Australia’s new approach to digital assets

The Statement says the Government's proposed approach "will help industry to identify opportunities and manage risks, unlock innovation, protect consumers and uphold market integrity." The approach aims to align Australia's digital asset sector with international best practice, in a bid to boost its global competitiveness.

The reforms will be underpinned by four key pillars:

• the establishment of a framework for Digital Asset Platforms (DAPs), which are online platforms that hold digital assets, such as crypto, for consumers;

• the establishment of a framework for payment stablecoins, which will be treated as a type of Stored-Value Facility (SVF) under the Government’s Payments Licensing Reforms;

• undertaking a review of Australia’s Enhanced Regulatory Sandbox; and

• safely unlocking the potential benefits of digital asset technology across financial markets and the broader Australian economy.

The approach is informed by public consultations on DAPs and payment stablecoins, ensuring that the framework aligns with the needs of both businesses and consumers.

Legislative framework for DAPs and payments system modernisation

The Government’s new regulatory framework will focus primarily on operators of DAPs. Importantly, it will not place additional regulatory burdens on digital asset issuers or businesses that create or use digital assets for non-financial purposes.

This approach is designed to mitigate key consumer risks while fostering growth and innovation in the sector.

Alongside the DAP reforms, the Government is also working on a comprehensive framework for Payment Service Providers (PSPs). These reforms will update the licensing regime for non-cash payment facilities, ensuring it covers the wide range of payment products and services available in Australia. A key aspect of this initiative is the regulation of payment stablecoins, which function similarly to other SVFs and will be subject to comparable requirements.

Regulatory coverage under the DAP Regime

Entities proposed to be included in the DAP Regime include:

• Platforms offering common digital products that involve custody arrangements, such as trading platforms, custody products, and certain brokerage arrangements.

• Businesses, including foreign entities, that provide specified services, such as operating and dealing in DAPs and issuing and redeeming tokenised SVFs. The Statement notes that providing advice on DAP usage will be included.

The DAP Regime will be subject to a number of exclusions, including businesses assisting customers in acquiring non-financial digital assets under specified conditions and small-scale and start-up platforms that do not meet certain size thresholds.

The Statement clarifies that:

• businesses will not need a financial markets licence to provide certain stablecoins and wrapped tokens;

• dealing or secondary market trading in these products will be not treated as a dealing activity; and

• platforms where they are traded will not be treated as operating a market because of that trading activity.

Obligations for regulated entities

The Statement proposes that businesses falling under the new regulatory scope must adhere to established financial service provider obligations, including (but not limited to) conducting operations honestly, fairly, and efficiently, avoiding conflicts of interest and meeting minimum capital adequacy requirements.

Additionally, DAP operators and tokenised SVF issuers would need to comply with:

• Rules safeguarding customer assets, including existing ‘client monies’ rules and custodial service standards.

• Requirements for redeeming stored value represented by digital tokens.

• Tailored disclosure obligations, such as transparency on asset reserves and specific rules for digital assets without traditional issuers.

Looking ahead: transition process

As Australia moves towards a regulated digital asset industry, the Government is focused on ensuring a smooth transition for businesses and stakeholders.

The commencement dates for these reforms will be determined through legislation, with stakeholder feedback sought on implementation strategies. This includes potential relief from licensing requirements that could conflict with the intent of the reforms.

Additionally, the ASIC is currently reviewing stakeholder input on proposed updates to its Crypto-assets Information Sheet 225, which will help shape the forthcoming DAP and SVF reforms.

Draft legislation is expected to be released for public consultation in 2025.

Future innovation and regulatory developments

Beyond immediate regulatory priorities, the Government’s long-term agenda focuses on fostering innovation and aligning Australia’s digital asset industry with global standards.

Key initiatives include a review of the Enhanced Regulatory Sandbox in 2025, and collaboration between the Government, the Digital Finance Cooperative Research Centre, ASIC, APRA, and the RBA to trial the use of tokenised money, including a central bank digital currency and stablecoins in wholesale asset markets.

The Government also acknowledges the significant challenge of de-banking in relation to the digital asset sector. The Statement suggests that the proposed licensing frameworks for digital asset industry participants and payments providers will help improve the risk management capability of businesses within the sector. The Government will continue to engage with industry in relation to de-banking issues.