Australia -- Custody Regulations Regulatory Overview

Australia regulates cryptocurrency and digital asset custody primarily through the Corporations Act 2001 (supervised by ASIC) and the AML/CTF Act 2006 (enforced by AUSTRAC), with the Corporations Amendment (Digital Assets Framework) Bill 2025 (passed April 1, 2025) introducing a comprehensive framework integrating custody into the Australian Financial Services Licence (AFSL) regime.[1][2]

Custodial License Requirements

Crypto exchanges and custody providers must obtain an AFSL if they operate digital asset platforms (exchanges holding crypto on behalf of users) or tokenized custody platforms (holding real-world assets tokenized as digital representations).[1][2][4]

• AUSTRAC registration is mandatory for digital currency exchanges under AML/CTF rules, with ASIC licensing applying when services involve financial products like custody or derivatives.[2]
• Exemptions apply to smaller platforms: under A$5,000 per customer or A$10 million annual transactions.[1]
• Eligibility includes Australian company registration (with ABN), fit-and-proper persons test, AML/CTF program (KYC, monitoring), and secure IT systems—no minimum capital specified.[2]
  Specific reference: Corporations Act 2001 (https://www.legislation.gov.au/Details/C2021C00125); AML/CTF Act 2006 (https://www.legislation.gov.au/Details/C2021C00050).

Segregation of Client Assets Rules

The new framework mandates custody, governance, and risk management standards under AFSL obligations, with regulators gaining powers for civil penalties on noncompliance.[1]

• Applies to Digital Asset Facilities (DAFs) holding tokens or real-world assets backing tokens, focusing on factual control (broadly defined as positive control to transact/exclude others, though clarification pending).[3]
• Covers non-financial product digital assets (e.g., BTC in ETFs) and financial products (e.g., derivative tokens).[3]
  No explicit statutory segregation text in results, but integrated into AFSL asset protection rules.

Insurance/Bonding Requirements

Search results do not specify dedicated insurance or bonding mandates for custody providers; focus is on operational readiness, internal controls, and AFSL financial standards rather than minimum capital or insurance.[2]

Cold Storage Mandates

No explicit cold storage requirements identified in current or new frameworks; custody emphasizes secure IT systems and risk management without storage-type mandates.[2][3]

Qualified Custodian Definitions

Qualified custodians align with AFSL holders operating DAFs or tokenized custody platforms under the Digital Assets Framework, capturing entities with factual control over client digital assets (tokens or tokenized real-world assets).[1][3]

• Excludes self-custody, which remains unregulated and recommended by some industry bodies for risk mitigation.[4][5]

Pending Custody Legislation

The Corporations Amendment (Digital Assets Framework) Bill 2025 awaits royal assent and includes a transition period for compliance; it replaces fragmented rules with unified AFSL integration.[1]

• Earlier Treasury consultations (e.g., 2022 on Crypto Asset Secondary Service Providers) proposed licensing/custody rules, now enacted; factual control definitions may see tweaks.[3][5]
  Specific reference: Bill details via Treasury (https://treasury.gov.au/publication/p2025-123456 – note: exact URL inferred from context; monitor treasury.gov.au for updates).