Australia's Cryptocurrency Regulations Challenge the Balance Between Fostering Innovation and Safeguarding Investors

Australia is taking steps to bring cryptocurrency oversight into its mainstream financial system, signaling a major transformation in the country’s regulatory environment. On September 25, 2025, the federal government unveiled proposed laws that would require crypto exchanges, fintech companies, and digital asset platforms to meet financial service standards similar to those applied to banks and insurance firms. Announced by Assistant Treasurer Daniel Mulino, the new policy enforces requirements for governance, capital adequacy, and consumer safeguards under the Corporations Act. The initiative seeks to resolve ongoing regulatory uncertainty while maintaining space for innovation, a priority for industry participants.

The proposed rules establish two main categories of regulation: one for trading and exchange operations, and another for asset custody. Providers will need to secure an Australian Financial Services Licence (AFSL), which brings obligations such as minimum capital holdings, separation of client assets, and strong cybersecurity measures. Stablecoins are specifically addressed under a new “stored-value facility” framework, regulated by the Australian Prudential Regulation Authority (APRA), placing them alongside conventional financial products. Smaller providers—those managing less than AUD 5,000 per customer or processing under AUD 10 million annually—will benefit from streamlined compliance requirements.

Strict penalties are set for breaches, with fines that can reach AUD 16.5 million or 10% of yearly revenue. These tough measures are designed to prevent wrongdoing and promote responsibility, especially in the wake of failures like FTX that exposed Australian investors to risk. The legislation also requires clear procedures for transaction settlement, managing conflicts of interest, and resolving disputes.

The industry’s response has been cautiously positive. Jonathon Miller, Kraken’s Australian managing director, welcomed the reforms for lowering the threat of “debanking”—a persistent issue for crypto businesses seeking access to traditional banking. Coinstash co-founder Mena Theodorou stressed the importance of customized rules, cautioning against simply applying old financial regulations to a new sector. Jonathan de Wet of Zerocap pointed out the need to balance consumer protection with the encouragement of innovation.

On the global stage, Australia’s strategy is similar to Singapore’s method of incorporating crypto into existing financial regulations, but it also features special exemptions for smaller players. This approach aims to make Australia competitive with regulatory centers like the EU (under MiCA), the UK, and the UAE, while steering clear of the patchwork system seen in the U.S. Experts believe this legal structure could draw institutional investors and strengthen Australia’s standing as a regional crypto center.

The draft legislation is open for public feedback until October 24, 2025, reflecting a wider effort to harmonize with international standards while addressing local priorities. The final version is anticipated in 2026, with implementation timelines yet to be finalized. For companies, preparing early for compliance will be essential to adapt to the new rules.