Australia to Require Crypto Firms to Hold Financial Services Licenses Under Corporations Law

The Australian Securities and Investments Commission is gearing up to expand its regulatory oversight in the cryptocurrency sector, targeting not only crypto exchanges but also other firms operating within the space. This move is driven by the regulator’s view that a majority of prominent crypto assets fall under the purview of the Corporations Act, necessitating compliance with existing financial laws.

ASIC plans to release an update to “Information Sheet 225” by November, with the goal of providing clearer guidelines on how various crypto tokens and related products should be regulated.

According to ASIC Commissioner Alan Kirkland, this forthcoming update is intended to ensure that many crypto-asset firms in Australia will need to operate under a formal license, aligning with the broader expectations of the Corporations Act. He emphasized that the regulator supports innovation in the crypto industry but is equally focused on minimizing risks to consumers and enhancing market integrity.

The proposed regulations reflect a broader trend of tightening control over the crypto industry in Australia. Last year, the Australian Treasury suggested that crypto exchanges holding a specific volume of assets would be required to obtain an Australian Financial Services License.

Although an exposure draft was anticipated this year, its introduction may be delayed until after the federal election. The Treasury has cited vulnerabilities and failures within crypto platforms as key reasons for the need to impose stronger consumer protections.

Australia’s approach to crypto regulation comes amid growing concerns about the risks associated with crypto assets. ASIC revealed that, since July 2023, it had removed over 7,300 scam websites, with 615 of them tied to cryptocurrencies. Additionally, the Australian Competition and Consumer Commission found that more than half of the crypto-related advertisements on Facebook were either scams or violated platform policies, further underscoring the urgency for stricter oversight.

In light of these developments, ASIC is poised to introduce new guidance, which will likely require crypto firms operating in Australia to secure financial services licenses. These impending rules are expected to extend beyond the typical digital currency exchanges, bringing a wider range of crypto-related businesses into the regulatory fold.

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At the recent Crypto and Digital Assets Summit in Sydney, Commissioner Kirkland highlighted ASIC’s ongoing efforts to strike a balance between fostering responsible innovation and mitigating potential harms. He reiterated that licensing would not only offer necessary protections but also strengthen consumer confidence and market transparency—both critical components in fostering trust within the financial system.

With the new regulatory guidance expected soon, the Australian crypto landscape is set for significant changes. ASIC plans to open the draft for industry feedback in the coming months, providing stakeholders an opportunity to weigh in on the proposed rules.

This move aligns with ASIC’s broader goal of creating a more secure, transparent, and innovative financial environment for crypto assets, while protecting consumers from fraud and other risks that have plagued the sector.