Regulator updates digital asset guidance, crypto platforms must join AFCA

Earlier this month, the government released a draft for consultation of the proposed Payment Systems Modernisation Bill, which will formally bring stablecoins into the payments system.

The bill will allow stablecoins to have their own set of rules and a defined, fit-for-purpose market structure, rather than being forced into frameworks that are not designed for digital currencies.

The regulator’s updated guidance stated that stablecoins, wrapped tokens, tokenised securities and digital asset wallets are among the digital asset products that it considers to be financial products in its updated guidance.

ASIC commissioner Alan Kirkland said distributed ledger technology and tokenisation are reshaping global finance and the guidance provides the regulatory clarity that firms have been calling for to innovate confidently in Australia.

“Many widely traded digital assets are financial products under current law – and will remain so under the government’s proposed law reform – meaning many providers require a financial services licence,” Kirkland said.

“Licensing ensures consumers receive the full suite of protections under the law and allows ASIC to act when poor practices lead to harm.”

He continued that ASIC recognises that firms will need time to consider the updated guidance and apply for licences, so has granted a sector-wide no-action position until 30 June 2026.

It also proposes to provide relief for stablecoin and wrapped token distributors to smooth the transition to proposed law reform.

The Australian Financial Complaints Authority said the updated guidance from ASIC requiring digital asset businesses to have an Australian Financial Services Licence (AFSL) means vital consumer protections are extended to investors of cryptocurrency and digital assets.

Shail Singh, AFCA’s lead ombudsman for investments and advice, said it expects better regulation will reduce fraud and security issues, and it also means cryptocurrency platforms will need to have internal dispute resolution processes for their customers, should they have an issue with a product.

“Consumers will also have the right to come to AFCA, as an independent umpire, if they can’t resolve a dispute with a licensed firm,” Singh said.

Until now, cryptocurrency was not regulated as a financial product under the Corporations Act, so providers of cryptocurrency or digital assets were generally not required to be members of the AFCA external dispute resolution scheme.

However, some had chosen to be voluntary members or were members under a condition of an industry association.

In the FY2024–25, AFCA received 159 complaints about cryptocurrency firms that were voluntary members.

The top three issues were scams, interpretation of product terms and conditions, and failure to act in a client’s best interest.

Singh said AFCA would work with digital asset businesses to ensure a smooth transition to the new arrangements.