Australia's Draft Crypto Regulations Welcome Industry Support but Face Criticism Over Vague Definitions

Australia has introduced draft legislation aimed at regulating digital asset platforms, including crypto exchanges, custodians, and service providers. The proposed framework, unveiled by the Treasury, requires these platforms to obtain an Australian Financial Services Licence (AFSL) from ASIC, bringing them in line with traditional financial institutions.

The draft laws include exemptions for smaller operators: platforms with annual trading volumes under $6.5 million or average customer deposits below $3,300 are not required to apply for a licence. This measure is designed to balance regulatory oversight with support for innovation and small businesses.

Industry reaction has been largely positive, with groups like Blockchain Australia welcoming the move as a step toward regulatory certainty. Kate Cooper, CEO of OKX Australia, noted that the laws signal crypto's integration into the mainstream financial system but stressed that clear implementation is essential to prevent unlicensed operators from gaining an unfair advantage. Liam Hennessy, a partner at Thomson Geer, praised the draft as a fair approach that could establish Australia as a trusted hub for digital assets, contrasting it with stricter European rules and confusing U.S. regulations.

Despite the support, concerns have been raised about vague definitions in the draft, particularly around what constitutes a digital asset platform and which assets fall under regulatory control. Experts warn that unclear terms could lead to compliance confusion, potentially stifling innovation and disadvantaging startups and smaller players who lack resources to adapt. Crypto advocates argue that overregulation or ambiguity might force innovation offshore, undermining Australia's competitiveness in the global Web3 economy.

The government has opened a consultation period until December 1, 2025, allowing stakeholders to provide feedback and push for more refined definitions. The outcome will shape a framework that aims to protect consumers while supporting sector growth, with Australia's approach being closely watched as a potential blueprint for other countries.