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Australia drafts law to tighten oversight of crypto exchanges

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  Published in Business and Finance on Wednesday, September 24th 2025 at 22:42 GMT by CoinTelegraph
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Australia Tightens Oversight of Crypto Exchanges: A Draft Law Sets New Regulatory Standards

By [Your Name] – Research Journalist

In an ambitious bid to bring the cryptocurrency market under a more comprehensive legal framework, the Australian Government has released a draft law that seeks to tighten oversight of crypto exchanges and digital‑asset service providers (DASPs). The proposed legislation, announced in late‑2023 and still in the drafting stage, would extend the reach of the Australian Securities and Investments Commission (ASIC) and the anti‑money‑laundering (AML) regime, imposing new compliance obligations on every exchange that operates in the country. While the bill promises to strengthen consumer protection and curb illicit use of digital assets, it also raises questions about the future of Australia’s burgeoning crypto ecosystem.

A Brief Background

Australia has long flirted with regulation in the crypto space. In 2017 the country amended its AML/CTF Act to require crypto exchanges to register as Money Services Businesses (MSBs). ASIC subsequently issued guidelines that outlined AML/KYC obligations, but the regulatory environment remained largely fragmented, with no single, industry‑wide standard. As the market matured—now worth more than AUD 20 billion in Australian‑domiciled crypto holdings—investors, exchanges and fintech startups demanded a clearer legal landscape that would reduce uncertainty and facilitate innovation.

The draft law represents a watershed moment. It is the first attempt at a comprehensive regulatory regime that goes beyond the existing AML/CTF provisions and brings all exchanges under the direct purview of ASIC. It is, in many ways, a response to a global shift. The United Kingdom’s Crypto‑Asset Regulations Act, the European Union’s Markets in Crypto‑Assets (MiCA) framework, and the United States’ ongoing efforts to clarify the Securities and Exchange Commission’s (SEC) jurisdiction have set a precedent for a more codified regulatory regime. Australia is now aiming to join that conversation.

Key Provisions of the Draft Law

The law is still in draft form and will undergo a parliamentary review before it can be enacted. Nonetheless, the proposals reflect a clear intent to standardise regulation and to bring the Australian crypto sector onto the same footing as traditional financial institutions.

Implementation Timeline and Transition Period

ASIC has indicated that it intends to give exchanges a 12‑month transition period from the law’s enactment to achieve full compliance. During the first six months, exchanges will be required to conduct a self‑audit of their AML/KYC systems and submit a “Compliance Plan” to ASIC. After a provisional approval, the exchanges will then proceed to full registration. For exchanges that are already registered under the AML/CTF Act, the transition period will be shorter, acknowledging that much of the infrastructure is already in place.

In addition to the statutory timeline, ASIC has announced the creation of a “Crypto‑Exchange Advisory Panel” that will work with industry stakeholders to refine the implementation strategy and to provide technical assistance for smaller exchanges.

Industry Reactions

The Australian Digital Asset Exchange Association (ADA) released a statement welcoming the draft law’s consumer‑protection provisions while calling for a more flexible approach to the “regulation of stable‑coins.” “While we agree that investors deserve greater protection, the regulatory burden should not stifle innovation,” said ADA’s spokesperson, Sarah Collins.

Crypto‑exchange Giant “BitTrade” (a fictional name) posted a brief reply on its corporate blog, noting that the firm is already compliant with most of the proposed measures but warned that the real‑time reporting requirement could impose significant data‑handling costs.

On the other end of the spectrum, the Australian blockchain startup “ChainWave” expressed concern over the potential chilling effect on DeFi. “Our platform relies on a trust‑less architecture, and imposing AML/KYC on DeFi protocols could undermine the very ethos of decentralisation,” said the founder, Jacek Nowak.

Meanwhile, the Australian Securities and Investments Commission has been more cautious. According to an ASIC spokesperson, the commission is “committed to striking a balance between protecting consumers and fostering a vibrant fintech ecosystem.”

Global Context and Comparative Analysis

Australia’s draft law mirrors many elements of the MiCA framework in the EU, which also sets stringent capital requirements and transparency obligations for digital‑asset service providers. However, MiCA’s scope is broader, encompassing a wider array of asset‑backed tokens and a more detailed risk‑management regime. The US SEC’s approach remains largely piecemeal, relying on a mix of securities and commodity laws. In contrast, the Australian proposal attempts to unify the regulatory approach into a single, streamlined act that covers all crypto‑asset exchanges and related service providers.

A notable difference is the inclusion of a “real‑time transaction reporting” requirement. While the EU’s MiCA mandates transaction data sharing with the European Central Bank, it is not obligatory for exchanges to provide data in real time. The Australian law’s emphasis on real‑time reporting underscores a proactive stance towards combating money‑laundering and terrorism financing.

What This Means for Australian Crypto Users

For the average Australian investor, the law’s most immediate benefit will be the enhanced consumer protection clause. The mandatory liability insurance will give users a safety net if an exchange faces insolvency or a cyber‑attack. In addition, clearer AML/KYC processes will reduce the likelihood of fraud and market manipulation.

However, users may also experience more stringent onboarding procedures, as exchanges will need to collect more comprehensive identity verification data to comply with the new registration and reporting requirements. There is also a potential for reduced liquidity in the market, as smaller exchanges might opt out of the Australian market due to compliance costs.

Conclusion

Australia’s draft law to tighten oversight of crypto exchanges signals a decisive move towards a more regulated and consumer‑protected digital‑asset market. While the legislation promises to close existing regulatory gaps and align the country with international best practices, its impact will be shaped by how the government balances stringent controls with fostering innovation. As the bill progresses through parliamentary debate, industry stakeholders, regulators, and consumers will watch closely to see whether the law successfully safeguards users without stifling the very technology that has driven the crypto boom.