Asic's Proposed Regulation of Digital Asset Platforms and Tokenised Custody: What Australian Operators Should Be Planning For

The Australian Government and the Australian Securities and Investments Commission (ASIC) have signalled a clear direction of travel: digital asset platforms and tokenised custody arrangements are to be brought within Australia’s financial services licensing regime. Treasury has consulted on a proposed “Digital Asset Platforms” framework designed to regulate businesses that hold digital assets for clients, and ASIC has published guidance (including through Information Sheet 225) on how existing financial services law applies to crypto-asset–related products and services. For exchanges, custodians, tokenisation platforms, fund managers and offshore providers servicing Australian clients, the practical question is how to map business activities, plan licence applications and engage with the reform process.

This guide explains the likely shape of the proposed standards and the practical steps operators should take now.

Important: This article describes the broad direction of Australian digital asset reform as proposed. Specific instrument numbers, commencement dates and consultation deadlines change as the reform progresses, so operators should always confirm current details directly from ASIC, Treasury and the Federal Register of Legislation before acting.

Summary, the proposed regulation of digital asset platforms

The proposed reforms represent a significant structural change in Australian financial services law. The policy intent is to introduce regulated categories for businesses that provide access to, and custody of, digital assets on behalf of clients, commonly described as digital asset platforms, and to bring them within the Australian financial services (AFS) licensing regime administered under the Corporations Act 2001 (Cth). Alongside this, arrangements involving the custody and tokenised representation of underlying assets (sometimes described as tokenised custody) raise related licensing and custody questions. The detailed rules, guidance and financial requirements that would support any such framework are expected to be developed through ASIC consultation once the enabling legislation is settled.

Scope of the reform

Consultation on these reforms invites feedback on how the regulator proposes to exercise its rule-making and guidance functions. Key practical questions for operators include: how to determine whether an activity is caught, how to apply for or vary a licence, what operational controls will be expected, and what financial thresholds will apply. ASIC and Treasury have sought input from industry on the interpretation of the proposed definitions, the operational feasibility of any proposed standards, and the design of transitional arrangements. That makes active engagement with the consultation process a genuine opportunity to influence the final rules rather than a formality.

Documents to expect in a consultation package

A typical ASIC consultation package implementing a reform of this kind would be expected to comprise several interlocking elements:

• Draft regulatory guidance. Explanatory material setting out how ASIC interprets the new statutory tests and how it expects licensees to meet their obligations.
• Proposed operational standards. Detailed requirements covering asset-holding and custody, together with trading and settlement activities.
• Proposed financial requirements. Measures addressing the financial resilience of platform operators, described by type and structure.
• Disclosure and platform rule expectations. Requirements for client disclosure, terms of use and platform rules.
• Transitional or streamlined licensing routes. Possible pathways for existing AFS licensees and for applicants who engaged with the regulator during the Information Sheet 225 period.

The primary documents, once released, will be available through ASIC’s media releases and its consultation papers index. Operators preparing a submission or a licence strategy should work from those primary sources rather than secondary summaries, because the drafting detail will determine how each business model is treated.

Mapping your business model to the proposed concepts

The single most important early task is to work out whether, and how, your activities fall within the proposed regulated concepts. The policy approach is functional: classification is expected to turn on what a platform actually does for clients, not on how it describes itself. Because the proposed standards will be built on these functional tests, getting the mapping right is the foundation of every downstream decision about licensing and compliance.

How to apply the tests to common business models

Broadly, a digital asset platform concept is directed at arrangements under which digital tokens are held for clients and through which clients can transact, while tokenised custody concerns arrangements where underlying assets are recorded or held and represented through digital tokens. The precise statutory wording, once enacted, will govern each test, and ASIC guidance would be expected to explain how the regulator reads those provisions. The following worked examples illustrate the practical approach:

• Exchanges. An operator running an order book or matching engine and holding client tokens will typically engage the digital asset platform concept. The distinction between an order-book model and a matching service can affect the characterisation of the service and the controls expected around trading and settlement.
• Custodians. A business that holds digital tokens on behalf of clients is squarely within the territory the reforms are designed to capture, with particular focus on segregation, reconciliation and proof of holdings.
• Tokenisation platforms. A platform that records off-chain or underlying assets as digital tokens, representing, for example, real-world assets or fund interests, should test its activities against the tokenised custody concept, which focuses on the custody and representation of underlying assets.
• Fund managers using tokenised assets. Managers that issue or administer tokenised fund interests need to consider whether their custody and platform arrangements bring them within the new framework in addition to their existing managed investment scheme obligations.
• Market-makers. Firms providing liquidity on platforms should assess whether their trading activity, combined with any holding of client assets, draws them into the regulated concepts.
• Offshore platforms serving Australian clients. Non-Australian operators that provide services to Australian clients in a manner satisfying the statutory tests may be caught, regardless of where they are domiciled.

Examples and red flags

A key risk is dual classification. A business that both operates a trading venue and holds tokenised representations of underlying assets may engage multiple regulated concepts, triggering overlapping obligations. Red flags that warrant close legal analysis include: holding client assets alongside operating a trading function; offering tokenised versions of off-platform assets; blending custody with settlement; and marketing or onboarding Australian clients from offshore. Where the characterisation is uncertain, the safer course is to map each discrete activity against the proposed statutory wording and document the reasoning, so the analysis can support both the licence strategy and any consultation submission.

Licensing options: new AFS applications, variations and transitional routes

Once activities are mapped, operators must consider how they would obtain the necessary authorisations. There are three broad routes commonly seen in reforms of this kind: a fresh AFS licence application, a variation to an existing AFS licence, or a transitional or streamlined pathway for eligible applicants. ASIC guidance would be expected to describe how it intends to administer these routes, including any proposed streamlined process for existing AFS licensees and for those who engaged with the regulator under Information Sheet 225.

Preparing the written application

Whichever route applies, the substance of a strong AFS licence application is consistent. Operators should expect to prepare and submit:

• A clear description of the business model, including each activity mapped to the relevant regulated concept.
• Details of custody arrangements, including segregation, reconciliation and the approach to evidencing client holdings.
• Draft client disclosure documents and platform rules.
• Documentation of governance, risk management and operational resilience arrangements.
• Evidence addressing the proposed financial requirements and how the applicant will meet and monitor them.

Because any application will need to demonstrate readiness against the proposed standards, firms should begin assembling this material early rather than waiting for the final rules. Building the documentation in parallel with the consultation also sharpens a firm’s understanding of where draft standards are operationally difficult, insight that can feed directly into a submission.

What to expect from ASIC review

Applicants should plan for an iterative process. ASIC typically engages on the characterisation of activities, the adequacy of custody and settlement controls, the robustness of financial resources, and the quality of client disclosure. Given the volume of applications anticipated across the sector once a framework commences, lead time is critical. Firms that intend to be operating lawfully from commencement should treat early engagement as a priority and build in contingency for review cycles and requests for further information.

Offshore firms: when an Australian AFS licence is required

Offshore platforms frequently assume they fall outside the Australian regime because they are incorporated and operated abroad. That assumption is risky. Where an offshore platform provides services to Australian clients in a way that meets the statutory tests, it may require an AFS licence or need to make alternative arrangements. The relevant considerations include how clients are onboarded, where the service is provided and how the platform markets to Australians. The Corporations Act and ASIC guidance set out the factors to weigh, and offshore operators should obtain Australian legal advice on their specific facts well before any framework commences.

Likely standards, asset-holding, trading and settlement, and platform rules

The operational heart of any reform of this kind is a set of detailed expectations covering how platforms hold client assets, how they execute and settle transactions, and how they deal with clients. These standards are where much of the compliance cost and system design effort will land.

Asset-holding requirements

Asset-holding standards address the integrity and security of client holdings. Proposals in this area would be expected to focus on:

• Custody arrangements. Clear, documented arrangements for how digital tokens and underlying assets are held, including the use of appropriate custody technology and key management.
• Segregation. Separation of client assets from the operator’s own assets so that client holdings are protected and identifiable.
• Reconciliation. Regular reconciliation between internal records and on-chain or custodial positions to detect discrepancies promptly.
• Evidence of holdings. A credible approach to demonstrating that client assets are held as recorded, including proof-of-reserves style assurance.

The regulatory direction signals an expectation that controls are not merely designed but independently verifiable. Operators should anticipate that attestations and independent assurance over custody and reconciliation processes will form part of demonstrating compliance.

Trading and settlement standards

Trading and settlement standards address how transactions are matched, executed and finalised. Relevant themes include the reliability of matching systems, the integrity of settlement, including atomic settlement models where assets and consideration move simultaneously, and the integration between trading and custody functions so that settled positions are accurately reflected in client holdings. Operational resilience is a recurring thread: platforms are expected to maintain systems that can withstand stress, recover from disruption and continue to protect client assets and data. Incident reporting obligations would require operators to identify, escalate and notify material incidents in line with ASIC’s expectations.

Platform rules and client disclosure

Any framework is likely to include requirements for the rules that govern how a platform operates and how it communicates with clients. This covers the platform’s terms of use, the allocation of rights and responsibilities between operator and client, and the disclosures clients must receive so they understand the nature of the service, the risks involved and how their assets are held. Clear, accurate and accessible client disclosure is central to ASIC’s consumer-protection objectives, and operators should treat platform rules and disclosure documents as substantive compliance artefacts rather than boilerplate.

Across all three areas, asset-holding, trading and settlement, and platform rules, the practical takeaway is that the proposed standards are likely to expect documented controls backed by evidence and, in many cases, independent assurance.

Likely financial requirements and prudential considerations

Reforms of this kind generally propose financial requirements intended to support the resilience of platform operators. These typically address matters such as net tangible asset measures, liquidity and working-capital provisions, and associated financial reporting and monitoring obligations, rather than relying on a single headline figure. Operators should consult the relevant ASIC consultation material directly for the specific thresholds and the detail of how each requirement is calculated and tested once released.

How to document compliance

Meeting financial requirements is not only about holding resources; it is about evidencing and maintaining them. Operators should expect to put in place regular financial reporting, cash-flow and liquidity monitoring, and board-level oversight of financial position against the applicable thresholds. Audited accounts and management information systems will need to be capable of demonstrating ongoing compliance, not just compliance at the point of application. Building these processes early reduces the risk of a late-stage shortfall that could delay licensing or force an awkward capital raise close to commencement.

Impacts for M&A and fundraising

Financial requirements have strategic as well as operational consequences. Firms contemplating acquisitions, investment or fundraising should factor likely thresholds into their capital planning, because the need to maintain prescribed financial resources affects valuation, deal structuring and the timing of capital events. Boards should treat prospective financial requirements as a standing agenda item through any transition period and ensure that any corporate transaction preserves the group’s ability to meet its obligations.

Operational and compliance checklist for exchanges, custodians and tokenisers

The following checklist translates the likely proposed standards into concrete workstreams. Each item should have a named owner and a target date tied back to any commencement timetable.

• Governance and board oversight. Establish clear board accountability for the transition, with regular reporting on licensing status, financial requirements and operational readiness.
• Legal mapping. Document how each activity maps to the proposed regulated concepts, flagging any dual-classification risks.
• Custody and segregation design. Review and, where needed, redesign custody arrangements to meet segregation and key-management expectations.
• Reconciliation and proof of ownership. Implement robust reconciliation processes and a credible method for evidencing client holdings.
• AML/CTF interplay. Confirm alignment with Anti-Money Laundering and Counter-Terrorism Financing Act 2006 obligations and AUSTRAC guidance, including registration obligations for digital currency exchange providers, as these intersect with the operational requirements.
• Incident response and disclosures. Build or refresh incident identification, escalation and reporting procedures.
• Contracts and platform rules. Update terms of use, platform rules and client agreements to reflect the proposed standards.
• Client communications. Prepare clear disclosures explaining the service, the risks and how assets are held.

Quick-start 30/60/90 day plan

• First 30 days. Complete the legal mapping of activities to the proposed regulated concepts; form a view on which licensing route is likely to apply; and identify the key gaps in custody, financial resources and disclosure.
• By 60 days. Draft or update the business model description, custody documentation and platform rules; begin assembling evidence for likely financial requirements; and prepare any consultation submission.
• By 90 days. Finalise and lodge any consultation response before the relevant deadline; agree the licence application timetable; and set the programme of work needed to be operationally ready by commencement.

How to respond to a consultation, drafting a submission

Responding to an ASIC consultation is a strategic opportunity. The final rules will shape the sector for years, and well-evidenced submissions carry real weight. Any affected business, and interested advisers and industry bodies, can make a submission before the relevant deadline, following the process set out on the ASIC consultation page.

Submission contents template

An effective submission is structured, specific and supported by evidence. A workable template is:

1. Summary of position. A concise statement of your overall view and the key points you want ASIC to take away.
2. Clause-by-clause comments. Specific responses to the relevant proposals, identified by reference to the paragraphs or sections of the consultation.
3. Alternative drafting. Where a proposal is unworkable, offer practical alternative wording rather than simply objecting.
4. Evidence and data. Firm-specific examples, operational data and cost estimates that demonstrate the real-world impact of the proposals.
5. Transitional requests. Any issues with timing, lead time or transitional relief that ASIC should consider.

Priority themes to address include the interpretation of the proposed definitions, the operational feasibility of the asset-holding and settlement standards, the design and calibration of any financial requirements, and the adequacy of the transitional arrangements.

Common pitfalls in consultation responses

Submissions that assert conclusions without evidence rarely move the needle. Avoid generic objections, missing paragraph references, and claims of unworkability unaccompanied by data or an alternative. Worked examples drawn from your own operations are far more persuasive than abstract concerns. Where the issues are complex or commercially sensitive, consider legal support to frame the response and preserve any confidentiality concerns appropriately.

Transitional pathway and the role of Information Sheet 225

Reforms of this kind typically include a transitional period between the finalisation of guidance and commencement, during which operators complete their licence applications or variations and their operational readiness programmes. Firms should watch for any proposed streamlined routes for existing AFS licensees and for applicants who engaged with ASIC during the Information Sheet 225 period.

Information Sheet 225 (INFO 225) is ASIC’s guidance on how existing financial services law applies to crypto-asset–related products and services, including when a crypto asset may be a financial product. Firms that have already engaged with ASIC in reliance on INFO 225 should preserve their documentation and track how any streamlined route is finalised, as that history may support a faster path to licensing. Operators should be alert to the consequences of operating without the required authorisation once a framework commences; the shift to a licensed regime would signal a transition from the current guidance-based approach to a licensed, enforceable standard.

Comparison table: digital asset platform vs tokenised custody vs existing AFS activities

Conclusion and next steps

The proposed regulation of digital asset platforms and tokenised custody marks the point at which Australia’s digital asset sector is set to move from a guidance-based approach under Information Sheet 225 towards a licensed, standards-based regime. While specific deadlines and commencement dates should be confirmed directly from ASIC and Treasury as the reform progresses, the practical steps are clear: map each activity against the proposed regulated concepts, form a view on the right licensing route, build the custody, settlement, disclosure and financial-resource controls that the proposed standards are likely to require, and lodge a well-evidenced submission before any consultation deadline.

Operators that start now, and use the consultation process to shape the final rules, will be best placed to be licensed and operationally ready from day one.

Sources

1. Australian Securities and Investments Commission (ASIC)
2. ASIC, Consultation Papers index
3. ASIC, Information Sheets (including INFO 225)
4. Federal Register of Legislation, Corporations Act 2001 and amendments
5. AUSTRAC, AML/CTF guidance for digital currency exchange providers
6. The Treasury, digital asset reform consultation materials