Australia’s financial watchdog, the Australian Securities and Investments Commission (ASIC), has unveiled a comprehensive revision of its regulatory framework for digital assets, marking a significant step toward more expansive oversight of the crypto sector. This revision signals a shift from tentative proposals to enforceable guidance, bringing digital asset businesses more clearly under the umbrella of existing financial services laws.
The updated regulatory document, known as Information Sheet 225 (INFO 225), refines and expands upon the draft guidance issued in 2023. One of the most notable changes is the replacement of the term “crypto-assets” with “digital assets,” a broader classification that encompasses tokenized securities, stablecoins, and other blockchain-based financial instruments. This change is designed to ensure the guidance remains applicable amid the rapid evolution of digital finance and emerging token structures.
INFO 225 clarifies which digital asset-related products and services are likely to fall under the definition of “financial products” as outlined in Australia’s Corporations Act. This includes digital wallets that hold assets on behalf of users, platforms that facilitate token trading, and services offering staking or yield-generating products. ASIC emphasizes that if a digital asset product functions similarly to traditional financial products, it must comply with existing legal requirements such as licensing, disclosure, and consumer protections.
A key addition to the final guidance involves detailed examples of custody arrangements, outlining when and how custody of digital assets may be considered a regulated activity. According to ASIC, businesses that store or control digital assets on behalf of clients may need to obtain an Australian financial services (AFS) license. This move is in response to increasing concerns over asset security and custodial risk, especially in light of previous high-profile failures in the crypto industry.
While the guidance itself does not introduce new laws, it is intended to provide legal clarity and operational certainty for businesses ahead of broader legislative reforms expected from the Australian Treasury. These upcoming laws are anticipated to establish a bespoke licensing regime for digital asset platforms, further aligning the regulatory landscape with international standards set by bodies such as the Financial Action Task Force (FATF) and the International Organization of Securities Commissions (IOSCO).
ASIC Chair Joe Longo has consistently emphasized the need for proactive regulation in the digital asset space, highlighting investor protection as a central concern. He has warned that without clear regulatory boundaries, Australian consumers remain exposed to significant financial harm from unregulated or underregulated crypto products.
The updated INFO 225 also aims to reduce regulatory arbitrage, wherein companies attempt to evade compliance by labeling their offerings in ways that obscure their true financial nature. By focusing on the function rather than the form of digital assets, the guidance closes loopholes that previously allowed some businesses to operate outside the legal perimeter.
In addition, ASIC is encouraging businesses to conduct thorough legal assessments of their offerings. Companies are advised to seek legal advice and engage early with the regulator if there is uncertainty about whether their services constitute financial products or require licensing. Non-compliance could result in enforcement action, fines, or restrictions from operating in the Australian market.
Beyond its immediate implications, the updated guidance represents a broader trend in global financial regulation. Australia is aligning itself with jurisdictions like the European Union, Singapore, and the United Kingdom, which are similarly crafting regulatory frameworks for digital assets that balance innovation with investor protection.
From a business perspective, the guidance has both challenges and opportunities. On one hand, increased oversight may raise compliance costs and operational complexity. On the other hand, regulatory clarity can enhance industry credibility, attract institutional investment, and reduce the risk of legal uncertainty.
Looking ahead, ASIC plans to continue monitoring the digital asset market and may issue further updates as technologies evolve and new financial products emerge. The regulator has also signaled its intention to work closely with other agencies, including the Australian Prudential Regulation Authority (APRA) and the Australian Competition and Consumer Commission (ACCC), to ensure a coordinated regulatory approach.
In conclusion, the release of the updated INFO 225 marks a pivotal moment in Australia’s approach to digital asset regulation. By expanding the scope of oversight and offering more precise guidelines, ASIC is preparing the foundation for a safer, more transparent, and more resilient crypto ecosystem. Businesses in the sector must now adapt to meet these higher expectations or risk falling afoul of the law.
Additional considerations for digital asset businesses:
1. Licensing Implications: Firms offering digital asset services should prepare for a potential requirement to obtain an AFS license, even if they previously operated in a regulatory gray zone. This may involve demonstrating adequate financial resources, risk management procedures, and compliance frameworks.
2. Consumer Protections: ASIC is placing greater emphasis on transparency, requiring digital asset firms to provide clear disclosures about risks, fees, and asset custody. This echoes broader concerns about misleading marketing and insufficient investor education in the crypto space.
3. Cross-Border Enforcement: With many digital asset firms operating globally, ASIC is also exploring cooperation with foreign regulators to ensure cross-jurisdictional compliance. Australian businesses serving international clients may be subject to both domestic and foreign laws.
4. Token Classification: The guidance encourages a functional approach to token classification. Whether a token is categorized as a utility, security, or stablecoin depends on its economic characteristics, not just its label.
5. DeFi and Emerging Models: While decentralized finance (DeFi) platforms are not the primary focus of INFO 225, ASIC acknowledges the challenges they pose. Regulators are actively assessing how to apply existing laws to DeFi protocols that lack traditional organizational structures.
6. Transitional Period: As full-scale legislation is still in development, ASIC may offer transitional arrangements or no-action letters for firms that demonstrate good-faith efforts to comply. Businesses should stay informed on timelines and participate in consultations where possible.
7. Education and Training: Compliance professionals, legal teams, and executives in the digital asset industry should invest in ongoing education to understand the evolving regulatory expectations. Failure to stay updated can result in strategic missteps.
8. Impact on Innovation: While some worry that tighter rules may stifle innovation, others argue that regulatory certainty can foster responsible growth. Clear standards can help startups attract funding and gain user trust.
9. Technology and Reporting: Companies may need to enhance their technological infrastructure to support regulatory reporting, audit trails, and real-time compliance monitoring, particularly for custody and transaction services.
10. Public Perception: Strengthening oversight could also shift public perception of the crypto industry, encouraging broader adoption among retail users, financial institutions, and policymakers.
Ultimately, the evolution of ASIC’s regulatory guidance reflects the maturing of the digital asset sector. As crypto continues to integrate with mainstream finance, clear rules and robust oversight will be essential to ensuring sustainable growth and protecting stakeholders across the ecosystem.