Australia Crypto Custody Bill: New AFSL Requirements and ASIC Oversight for Exchanges

Australia crypto custody bill is making headlines with its push for stricter regulations on digital asset platforms, requiring crypto firms to obtain an Australian Financial Services Licence (AFSL) and operate under ASIC supervision. The Digital Asset Platforms Bill represents Australia’s first comprehensive framework for crypto custody and exchange oversight, aiming to enhance investor protection while fostering innovation in the $2.5 trillion global crypto market.

What Is Australia’s New Crypto Custody Bill?

The Australia crypto custody bill, formally titled the Digital Asset Platforms Bill 2025, establishes a dedicated licensing regime for crypto exchanges and custody providers. Under the legislation, entities handling digital assets must secure an AFSL from the Australian Securities and Investments Commission (ASIC), subjecting them to rigorous standards for asset segregation, risk management, and client fund protection.

The bill addresses gaps in the current framework, where crypto activities often fall under general financial services laws. It introduces specific rules for custody, including mandatory segregation of client assets and enhanced cybersecurity requirements. Violations carry heavy penalties, including fines up to $1.1 million per breach and potential license revocation.

This move aligns with global trends, following the EU’s MiCA regulation and Singapore’s Payment Services Act, positioning Australia as a compliant hub for crypto innovation.

• Licensing Requirement: AFSL mandatory for crypto custody and exchanges.
• Oversight Body: ASIC enforces compliance and audits.
• Penalties: Up to $1.1M fines per violation.

ASIC Supervision: Key Compliance Measures for Crypto Firms

ASIC supervision under the bill emphasizes investor safeguards:

• Asset Segregation: Client funds must be held separately from operational assets.
• Risk Disclosure: Platforms required to detail custody risks and insurance coverage.
• Annual Audits: Independent verification of reserves and security protocols.
• Reporting Standards: Quarterly disclosures on transaction volumes and risk exposure.

These measures aim to prevent failures like FTX, ensuring crypto platforms meet the same standards as traditional financial institutions. ASIC will also monitor for money laundering, with enhanced AML/CTF requirements integrated into the AFSL framework.

For crypto businesses, ASIC supervision means operating with the transparency of regulated banks, potentially attracting institutional capital while weeding out non-compliant players.

Implications for Australia’s Crypto Ecosystem

The Australia crypto custody bill could reshape the local industry:

• Boosted Confidence: Clear rules may draw $500 million+ in inflows by 2026.
• Innovation Balance: AFSL framework supports DeFi while mandating compliance.
• Global Competitiveness: Aligns Australia with Singapore and Dubai as a crypto hub.

However, smaller firms face challenges with licensing costs estimated at $200,000-$500,000 annually, potentially consolidating the market around established players.

2025 Australia Crypto Regulation Prediction: AFSL Adoption Surge

Australia crypto regulation prediction for 2025: 70% AFSL compliance among major platforms, with $500M+ inflows. Bull catalysts: Investor trust; bear risks: Compliance costs testing 50% adoption.

In summary, Australia crypto custody bill’s AFSL mandate and ASIC supervision introduce robust oversight for exchanges, balancing protection with innovation in the $2.5T market, eyeing $500M inflows by 2025.