As the consultation period closes on 24 October, Vakul Talwar, general manager for Australia at Crypto.com, is pressing the government to maintain its momentum.
“It is fundamental that the government does not take their foot off the throttle and acts as quickly as possible to make any changes to the legislation and then introduce legislation into the Parliament,” Talwar said.
The cryptocurrency exchange company told InvestorDaily that while parliamentary debate and amendments might delay the legislation, it considers this to be “unlikely”.
“In the discussions that Crypto.com has had with politicians and the broader crypto community to date, it seems as though this will largely have bipartisan support,” he said, adding that he estimates the timeline for this around March to April of next year.
Informed by similar moves in peer jurisdictions such as the US, the EU and the UK, the proposed bill seeks to formally classify digital asset platforms and tokenised custody platforms as financial products under the Corporations Act, placing them under the regulatory oversight of ASIC.
Under the bill, digital asset businesses would be required to hold Australian Financial Services Licenses (AFSL), with penalties for non-compliance of up to $16.5 million, three times the benefit obtained or 10 per cent of annual turnover. Smaller platforms with limited activity would be exempt from these requirements.
As previously highlighted by Assistant Treasurer Daniel Mulino, digital assets already fall within Australia’s existing legal and regulatory framework.
“Despite this, failures of digital asset businesses have highlighted the consumer risks, particularly where operators pool and hold client assets without consistent safeguards,” Mulino said at the time of the draft’s release.
In response to these risks, the Australian Financial Complaints Authority (AFCA) has welcomed the government’s initiative to enhance clarity and accountability within the digital assets sector in its 2024–25 annual review, released this week.
It noted that with around one in four Australians now owning cryptocurrency, serious consumer risk is arising from market volatility, misleading promotions, exchange collapses and a rise in cryptocurrency-related scams – making legislation more crucial now than ever.
In the report, AFCA stated its support for “same activity, same risk, same rules” for the sector, ensuring digital asset providers hold an AFSL, join AFCA, and have effective internal dispute resolution procedures.
Adoption hurdles
Blockchain business CloudTech Group has also been a vocal supporter of the draft legislation, as well as welcoming the recently released Tranche 1a draft, which is expected to formally integrate stablecoins into Australia’s payment system.
Chief financial officer (CFO) and executive director at CloudTech, Mandy Jiang, characterised the draft digital asset legislation as a “significant step forward in clarifying the regulatory treatment of digital asset custody providers”.
However, she noted that the company has identified some definitional issues and gaps that it believes should be addressed to ensure adequate consumer protection.
“While the bill establishes the regulatory perimeter and core licensing mechanics, many critical details – including licensing conditions, custody standards, and disclosure formats – have been delegated to ASIC for future guidance,” she told InvestorDaily.
Consequently, Jiang said the legislation’s success in fostering innovation, growth and competition within the sector will hinge on the promptness and quality of forthcoming guidance from ASIC.
She also put forward the idea of enabling investors to access financial advice on digital assets. This, she argued, would offer greater protection and boost consumer confidence within this market.
Head of global markets and corporate finance at MHC Digital Group, Edward Carroll, also identified some areas in the draft legislation that he said require clarification in the final consultation.
“Are bitcoin and tokenised securities both “digital tokens” under the proposal? Clarification of what digital asset platforms and tokenised custody platforms can actually offer trading and custody services for [is needed],” Carroll said.
He added that clarification around how these digital tokens interact with existing financial product regimes would also be helpful but nevertheless backed the draft legislation as a necessary and important step.
In terms of the anticipated transition period for platforms to meet new requirements if the bill is passed, Jiang said this will depend on how quickly ASIC can issue the requisite guidance on licensing requirements and process new license applications.
“Based on the draft legislation, we expect ASIC’s new asset-holding standards to be more supportive of digital asset custodians,” she said.
Like Crypto.com, she said CloudTech hopes to see the legislation introduced to Parliament early next year. This, she argued, would allow for a suitable transition period for market operators, with the aim of finalising the legislation by the end of 2026.
Talwar outlined support for a similar time frame, highlighting that international precedents suggest a six-month transition period once the bill is passed.
On the other hand, Carroll said this could take 12 to 14 months.
“There needs to be a reasonable period to transition, especially for those who don’t currently have an AFSL.”
