Australia Tightens Crypto Regulations: Licensing, CBDC Plans, and Enforcement Actions

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The Australian financial regulatory landscape is undergoing significant transformation as authorities move to strengthen oversight of the rapidly evolving cryptocurrency sector. From new licensing mandates to active enforcement against fraudulent platforms, regulators are prioritizing consumer protection, market integrity, and technological innovation. This article explores the latest developments in Australia’s crypto regulatory framework, including key policy updates, central bank initiatives, and enforcement outcomes.

New Licensing Rules for Crypto Firms

The Australian Securities and Investments Commission (ASIC) has announced plans to require cryptocurrency-related companies to obtain an Australian Financial Services License (AFSL) under the Corporations Act 2001. This move aims to bring clarity and consistency to how digital assets are treated under existing financial laws.

Alan Kirkland, ASIC Commissioner, highlighted during the AFR Digital Assets Summit that the current regulatory framework focuses on "financial products" involving investment, risk management, or non-cash transactions. However, certain characteristics of crypto assets don’t neatly fit into this model—leading to uncertainty about whether specific token structures require licensing.

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To resolve this ambiguity, ASIC plans to release updated guidance by November, clarifying the classification and regulatory treatment of digital tokens representing ownership or linked to financial products. The revised rules will help ensure that firms offering crypto-based financial services meet appropriate standards for transparency, compliance, and consumer safeguards.

RBA Prioritizes Wholesale CBDC Over Retail Version

In a recent joint report with the Treasury, the Reserve Bank of Australia (RBA) outlined its strategic direction on central bank digital currency (CBDC). While both retail and wholesale models have been under study, the RBA has decided to prioritize work on a wholesale CBDC rather than a consumer-facing retail version.

A wholesale CBDC would be used exclusively by financial institutions for interbank settlements and large-value transactions. According to the RBA, this model presents more immediate benefits—such as increased efficiency in clearing and settlement systems—and fewer risks compared to a retail CBDC, which would circulate among the general public.

The central bank emphasized that while a retail CBDC remains a long-term possibility, there is no current plan to issue one. Instead, efforts are focused on exploring use cases for tokenized deposits and programmable money in institutional finance.

This strategic focus aligns with global trends where major economies are testing wholesale CBDCs to modernize financial infrastructure without disrupting monetary policy or privacy norms.

Court Rules Against Bit Trade for Regulatory Violations

In a landmark decision last month, the Federal Court of Australia ruled that Bit Trade, the local operator of Kraken’s crypto exchange services, breached design and distribution obligations (DDO) and operated as an unlicensed credit provider.

ASIC initiated legal action in September 2023, alleging that Bit Trade failed to ensure its margin trading product was suitable for target customers—a core requirement under DDO rules designed to protect retail investors.

Although Kraken expressed disappointment with the outcome, it confirmed readiness to comply with the court’s ruling. ASIC is now seeking financial penalties against Bit Trade, reinforcing its stance that foreign crypto platforms must adhere to local regulations when serving Australian users.

This case underscores the regulator’s commitment to holding both domestic and international operators accountable, particularly those offering complex financial products like leveraged trading to retail clients.

ASIC Combats Over 600 Crypto Scams in One Year

As part of its broader crackdown on online investment fraud, ASIC revealed it has participated in dismantling 615 crypto investment scams over the past year. These efforts also included shutting down 5,530 fake investment platforms and blocking 1,065 phishing links.

Collectively, these scams caused approximately $1.3 billion USD in losses to Australian investors over the previous year. On average, around 20 fraudulent websites are taken down daily—a testament to the scale and persistence of cybercriminal activity targeting digital asset investors.

ASIC continues to urge consumers to remain vigilant, especially regarding social media promotions promising high returns from crypto schemes. The regulator warns that scammers are constantly evolving their tactics, often mimicking legitimate platforms or leveraging celebrity endorsements.

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Frequently Asked Questions (FAQ)

What is an AFSL and why do crypto companies need it?

An Australian Financial Services License (AFSL) is issued by ASIC to firms providing financial advice, dealing in financial products, or managing investments. Crypto companies may need an AFSL if their tokens or services qualify as financial products—such as when they involve investment contracts or profit-sharing mechanisms.

Does every crypto project need an AFSL?

No—not all crypto projects require an AFSL. Only those offering services or products that meet the legal definition of a "financial product" under the Corporations Act must be licensed. Projects focused solely on utility tokens or decentralized protocols may fall outside this scope, but each case is assessed individually.

What’s the difference between retail and wholesale CBDC?

A retail CBDC is designed for everyday use by individuals and businesses, functioning like digital cash. A wholesale CBDC is restricted to financial institutions for settlement purposes. Australia is currently focusing on the latter due to lower systemic risk and clearer use cases.

How can investors avoid crypto scams?

Investors should verify if a platform is registered with ASIC, avoid unsolicited investment offers (especially via social media), research projects thoroughly, and use secure wallets. Always double-check URLs and never share private keys.

Can foreign exchanges operate in Australia without a license?

No. Any exchange offering financial products or services to Australian residents must comply with local laws, including obtaining an AFSL if applicable. Failure to do so can result in legal action, fines, or service suspension.

What are design and distribution obligations (DDO)?

DDO rules require product issuers to ensure financial products are targeted at suitable consumers and include measures to prevent unsuitable sales. In the Bit Trade case, ASIC argued the margin trading product was not properly assessed for retail investor suitability.

Conclusion: Building a Safer Crypto Ecosystem

Australia’s approach reflects a balanced strategy—fostering innovation while protecting consumers and maintaining financial stability. With clearer licensing expectations, active enforcement against bad actors, and forward-looking central bank research, the country is positioning itself as a responsible player in the global digital asset economy.

Regulatory certainty benefits legitimate businesses by creating a level playing field and boosting investor confidence. As the crypto industry matures, compliance will become not just a legal necessity but a competitive advantage.

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By staying informed and cautious, investors and entrepreneurs alike can navigate this dynamic environment with greater confidence—knowing that robust frameworks are being built to support long-term growth and trust in the digital economy.

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