Australia Might Reclassify Stablecoins as Financial Products Requiring Licensing

Australia Reclassifies Stablecoins as Financial Products Requiring Licensing

Australia's securities regulator, the Australian Securities and Investments Commission (ASIC), has proposed classifying stablecoins, wrapped tokens, tokenized securities, and digital asset wallets as financial products under existing law. This reclassification will require service providers to obtain licenses and includes an eight-month transition period. The move aims to offer regulatory clarity while facilitating innovation in the rapidly evolving digital asset landscape.

Key Takeaways

ASIC has officially classified stablecoins and similar assets as financial products, necessitating service providers to secure licensing.
A transition period of eight months will allow the industry to adjust to the new regulations.
The goal is to enhance investor protection while promoting innovation within Australia’s growing cryptocurrency market.
Smaller firms with limited operations may be exempt from full licensing requirements.

New Regulatory Framework for Digital Assets

Australia's securities regulator has announced significant changes regarding stablecoins, wrapped tokens, tokenized securities, and digital wallets. These will now be considered financial products under current law, forcing service providers to obtain appropriate licensing, while providing an eight-month period for the industry to adjust.

The Australian Securities and Investments Commission (ASIC) unveiled this updated guidance on Wednesday, also introducing a sector-wide no-action position that will last until June 30, 2026.

ASIC Commissioner Alan Kirkland remarked, “distributed ledger technology and tokenization are reshaping global finance.” This guidance aims to bring clarity to regulations, allowing firms the confidence to innovate within Australia.

In an in-principle decision, ASIC has also proposed relief to distributors of specific stablecoins and wrapped tokens. Feedback on this draft relief is open until November 12.

Licensing Requirements Explained

The recent Information Sheet 225 clarifies that many widely traded digital assets are classified as financial products under current law and will maintain this classification under proposed government reforms.

Providers dealing with these assets must receive Australian Financial Services licenses. This ensures that consumers benefit from full legal protections and allows ASIC to take action against harmful practices.

While ASIC will consider the current no-action position in evaluating past conduct, it will continue to pursue any serious misbehavior that causes significant consumer harm or widespread systemic issues.

Additionally, the regulator proposed extending omnibus account structures for digital assets under specific conditions, updating existing custody standards to better accommodate blockchain-based assets.

This framework builds on the practical relief that ASIC provided earlier this year to support the Reserve Bank of Australia's Project Acacia, a research initiative focused on wholesale tokenized asset markets.

Government Reforms and a Comprehensive Digital Asset Framework

This guidance aligns with wider digital asset platform reforms proposed by the Australian government. Draft legislation released in September suggests imposing hefty penalties of up to 10% of annual turnover for platforms that violate these new regulations.

Exchanges and operators will be required to obtain Australian Financial Services licenses, facing fines of A$16.5 million, three times any benefits gained, or 10% of annual turnover for misleading practices or unfair contract terms.

The consultation period for the draft legislation concluded on October 24, marking a significant step toward regulating an industry that includes major players like Coinbase and Kraken.

Interestingly, smaller platforms, serving fewer than A$5,000 per customer and processing transactions under A$10 million annually, may be exempt from the full licensing requirements.

Officials from the Treasury indicated that this new regime would bring digital asset and tokenized custody platforms under the Corporations Act, enhancing consumer protections alongside formal licensing requirements.

Regulatory efforts are focused on striking a balance between investor protection and fostering innovation in a market where Australia’s crypto adoption surged to 31% in 2025, up from 28% the previous year, as noted in a16z’s State of Crypto 2025 report.

Australia Reclassifies Stablecoins as Financial Products Requiring Licensing

Expansion in the Stablecoin Market

In September, ASIC provided class relief for intermediaries distributing stablecoins issued by licensed Australian Financial Services providers. This exemption will last until June 2028, alleviating the need for distinct market, clearing, and settlement licenses.

Catena Digital Pty Ltd has emerged as the first qualified issuer for its AUDM stablecoin, with ASIC planning to extend relief to more licensed issuers addressing commercial viability concerns voiced during consultations.

The temporary relief aims to respond to industry feedback that highlighted significant barriers to stablecoin distribution under existing licensing frameworks, making it clear that operations would not be commercially viable without these intermediary exemptions.

Distributors are required to offer Product Disclosure Statements to retail clients as the only condition for accessing this relief, ensuring that consumer protection standards remain intact while reducing operational hurdles.

Australia's digital asset adoption is rapidly progressing. According to a16z’s State of Crypto 2025 report, Australia and South Korea lead developed nations in terms of token-related web traffic, with the country showing a focus on trading and speculation more than other regions.

Self-managed superannuation funds now represent a quarter of the pension system, with crypto exposure skyrocketing sevenfold since 2021, reaching A$1.7 billion amidst Australia’s $2.8 trillion pension pool.

Prominent exchanges are placing more effort into Australia’s retirement sector, with Coinbase set to launch a dedicated SMSF service that has already garnered over 500 investors on its waiting list.