Australia's financial watchdog has proposed stiffer rules for cryptocurrency exchanges, aiming to strengthen the protection of users' digital assets, improve trading practices and safeguard the country's financial stability ahead of a licensing deadline next year.

The Australian Securities and Investments Commission (ASIC), the country's corporate regulator, announced on Thursday that it had opened a consultation on the proposed rules. The standards would set out how crypto exchanges and digital asset custodians must protect customer funds, execute trades and meet financial requirements, and would require affected firms to obtain or update their regulatory approval or license.

The consultation closes on Nov. 27, with final guidance and standards expected in March 2027. The rules take effect on April 8, 2027. Crypto firms already operating in Australia will have until Oct. 7, 2027, to apply for a license and may continue doing business while ASIC reviews their applications. The consultation period gives affected firms and the public a window to comment before the standards are finalized.

The proposals mark the next step in Australia's effort to bring crypto businesses under the same regulatory framework as traditional financial firms. Parliament passed the enabling legislation in April, placing Australia alongside jurisdictions such as the European Union, Singapore and Hong Kong, which have introduced dedicated crypto regulations.

What the standards would cover

Under the consultation paper, platforms would be subject to standards covering:

• The separation and safeguarding of customer assets
• Trading transparency
• Settlement procedures
• Financial resources

Separation rules are designed to keep customer assets distinct from a platform's own funds, so that users' holdings remain identifiable and recoverable if an operator runs into trouble.

The proposed trading rules also address market manipulation, conflicts of interest and how exchanges handle customer orders.

For Australian investors, the changes would mean clearer rules on how exchanges hold their assets, execute orders and handle conflicts of interest. Crypto companies, for their part, would face new compliance obligations and financial requirements in order to operate legally in the country.

"Our approach is based on the principle of 'same activity, same risk, regulatory outcome' to align Australia with the approach of comparable overseas jurisdictions," ASIC Commissioner Alan Kirkland said.

Years in the making

Australia's move comes years after the 2022 collapse of FTX left about 30,000 Australian customers unable to access their money. Three years earlier, Cryptopia, an exchange in neighboring New Zealand, went bankrupt after a major hack. Both failures exposed the risks of holding funds on exchanges — the risk area the proposed safeguarding and separation standards are designed to address.

Stablecoins on a separate track

ASIC said it has recorded more than 140 applications from businesses seeking authorization to provide digital asset-related financial services — a sign of how many firms are already moving toward authorization under the new framework. The regulator added that stablecoins used for payments are being addressed separately through Australia's payment services reforms.