On Dec. 4, the Australian Securities and Investment Commission (ASIC) released a consultation paper outlining new guidelines for the crypto industry, mandating that many firms obtain financial licenses.

This move is seen as a significant regulatory shift, categorizing various digital assets as financial products that require compliance.

Under the proposed guidelines, crypto exchanges and firms dealing in digital assets will likely need to secure either an Australian Financial Services License (AFSL) or an Australian Market License.

Currently, businesses offering financial services in Australia must possess an AFSL, while trading platforms may also need an additional license.

Industry experts have expressed concern that these new requirements could adversely affect small and startup businesses. Liam Hennessy, a partner at Clyde and Co, noted that while larger firms could more easily absorb the associated legal and compliance costs, smaller companies might struggle to meet the new standards.

Joni Pirovich, a crypto lawyer, highlighted that the updated guidelines might make it more expensive for Australian innovators to launch local ventures compared to offshore alternatives.

While the proposed regulations aim to provide clarity in the market, they have raised alarms about a potential exodus of crypto firms from Australia. Charlie Karaboga, co-founder of Block Earner , stated that the financial reserves required to obtain an AFSL could jeopardize many startups.

The ASIC’s guidelines expand the definition of financial products to include stablecoins, staking services, and wrapped tokens, while certain digital assets like meme coins and gaming-linked NFTs may evade this classification.

Feedback on the draft guidelines is open until Feb. 28, 2025, with a final version expected by mid-2025. The ASIC aims to balance consumer protection with the fostering of financial innovation in the evolving crypto landscape.