Regulators are racing to close australia crypto regulation loopholes as rapid growth in digital assets, exchanges, and tokenized finance reshapes the country’s financial system.
Summary
ASIC warns of regulatory perimeter gaps in digital assets
The Australian Securities and Investments Commission (ASIC) has identified regulatory perimeter gaps in the crypto and fintech sectors as a critical risk for 2026, highlighting persistent exposure to unlicensed advice, misleading conduct, and exploitation of unclear rules.
Moreover, ASIC‘s Key Issues Outlook 2026, released Tuesday, singles out emerging financial sector participants in digital assets, payments, and users of artificial intelligence as priority areas that require enhanced oversight.
ASIC stressed that some entities are actively structuring their operations to remain outside formal regulation, which in turn reinforces perceived uncertainty and underlines the need for clearer licensing obligations and stronger supervision.
Enforcement challenges at the regulatory perimeter
The Key Issues Outlook 2026 highlights that rapid innovation by firms unfamiliar with financial services law continues to generate risks across the crypto ecosystem. However, the regulator acknowledges that some businesses still operate legitimately outside existing regulatory frameworks.
ASIC noted that deciding whether new product classes or services should fall within financial services licensing regimes ultimately rests with the Australian government, not the regulator, which can complicate timely enforcement.
That said, the urgency is growing. Australia’s crypto adoption rate reached 31% in 2025, up from 28% in the prior year, placing the country among the world’s most engaged crypto markets.
Self-managed superannuation funds have increased their digital asset exposure sevenfold since 2021 to A$1.7 billion, while major exchanges such as Coinbase are preparing dedicated cryptocurrency pension accounts that target Australia’s large retirement savings pool.
Despite this rapid growth, regulatory fragmentation persists across platforms, service providers, and product types, raising questions about consistent investor protections.
Joe Longo urges innovation as tokenization accelerates
ASIC Chair Joe Longo warned in November that Australia risks becoming a “land of missed opportunity” if it fails to adapt to blockchain-driven tokenization that is reshaping global capital markets.
“Australia must innovate or stagnate. Seize the opportunity or be left behind,” Longo told the National Press Club, underscoring the scale of the transformation facing regulators and market participants.
He added that J.P. Morgan had informed him its money market funds will be entirely tokenized within two years, a signal that institutional adoption of blockchain-based infrastructure is moving quickly.
In that context, debates over crypto regulation in Australia are increasingly tied to competitiveness, market integrity, and long-term capital formation as much as to consumer protection.
Parliament advances comprehensive crypto licensing framework
The Australian Parliament is currently debating the Corporations Amendment (Digital Assets Framework) Bill 2025, introduced in November by the Treasurer and the Financial Services Minister to address australia crypto regulation gaps with a comprehensive licensing model.
The proposed legislation would require crypto exchanges and custody providers to obtain Australian Financial Services Licenses (AFS licenses), formally bringing them under ASIC supervision.
Moreover, companies that breach the new rules could face penalties of up to 10% of annual turnover, marking a significant escalation in potential enforcement tools available to the regulator.
The bill creates two new license categories for digital asset platforms and tokenized custody platforms, shifting the focus of regulation toward businesses that control customer funds rather than the underlying blockchain technology.
Licensed firms will need to meet ASIC standards for transactions, settlement processes, and asset custody. However, small operators handling less than A$10 million in customer assets annually would be exempt from the new regime.
The government estimates that the framework could unlock around A$24 billion in annual productivity gains while simultaneously strengthening investor protection across Australia’s digital asset markets.
Temporary relief eases transition to new rules
While permanent legislation moves through Parliament, ASIC has rolled out a suite of temporary measures intended to bridge the transition period and reduce disruption for existing businesses.
In December, the regulator finalized stablecoin class relief that allows intermediaries to distribute certain stablecoins and wrapped tokens without securing separate licenses until mid-2028, provided they maintain appropriate records and issue Product Disclosure Statements to retail investors.
Moreover, the relief extends to omnibus custody structures, which are widely used in traditional finance but were previously constrained in crypto markets, enabling more consistent treatment across asset classes.
ASIC presented these temporary measures as a way to support responsible innovation while it awaits broader digital asset reforms covering tokenized payments, custody arrangements, and more detailed operational standards.
The regulator has also adopted a sector-wide no-action stance until June 2026, giving companies additional time to review updated guidance, file license applications, or adjust business models to meet anticipated obligations.
Existing rules already capture many digital asset products
ASIC’s INFO 225 guidance confirmed that a wide range of products already fall within existing financial product rules that require AFS licenses, even in the absence of new primary legislation.
That said, the guidance explicitly notes that many stablecoins, wrapped tokens, tokenized securities, and digital asset wallets are likely to be treated as financial products under current law.
As a result, firms providing access to these instruments may already be subject to licensing, conduct, and disclosure obligations, regardless of whether they identify themselves as traditional financial services providers.
This approach reflects ASIC’s broader view that regulation of digital assets should focus on functions and risks rather than labels or specific technologies.
Broader risk landscape extends beyond crypto
Beyond digital assets, ASIC highlighted nine additional critical risks for 2026, emphasizing that vulnerabilities are building across the wider financial system.
These include increased retail exposure to private credit markets, operational failures by superannuation trustees, cyber-attacks that could undermine market confidence, and potential outages affecting CHESS clearing and settlement infrastructure.
Moreover, the regulator warned that growing global regulatory divergence is driving fragmentation that complicates compliance and risks uneven consumer outcomes across jurisdictions.
For now, Australia’s regulatory push is designed to catch up with global peers while closing gaps that have left investors exposed to fraud, operational breakdowns, and unclear legal protections in fast-evolving crypto and fintech markets.
In summary, ASIC’s agenda through 2026 centers on clarifying the regulatory perimeter, implementing a robust crypto licensing framework, and managing systemic risks as tokenization and digital assets become embedded in Australia’s financial architecture.
