What platform operators need to know as ASIC consults on digital assets reform

ASIC proposes to issue a single new regulatory guide, currently titled ‘Regulatory Guide 000 Digital asset platforms and tokenised custody’, covering the DAP and TCP regime. 

Key proposals include:

• regulatory perimeter: guidance on when a facility is a DAP or TCP, the extended meaning of ‘dealing’, how the regime interacts with the financial market and clearing and settlement facility regimes (a facility cannot be both a DAP and a financial market simultaneously), and the new licensing exemptions, including for low value DAPs (which we have set out in a previous article), limited advice and arranging, third-party asset-holding arrangements and overseas issuers and clients;
• licensing: new AFS licence authorisations for DAPs and TCPs aligned to business models, updates to RG 1, and separate guidance for firms that need to vary an existing licence during the April to October 2027 transition period. ASIC is also considering publishing a list of firms that apply for or vary a licence by 7 October 2027 (and can therefore continue operating);
• general obligations: a catalogue directing operators to existing guidance on AFS licensee obligations, with targeted guidance where digital asset business models raise distinct issues. ASIC is seeking feedback on additional guidance that industry may require regarding responsible manager, conflicts and professional indemnity insurance requirements;
• disclosure: guidance on the new DAP/TCP Guide and platform rules, and an extension of ASIC’s electronic disclosure relief to DAP/TCP Guides. The content requirements for DAP/TCP Guides are quite substantive and are currently set out in the DAF Act  – following ASIC’s consultation, industry will have a clearer understanding of the practical and commercial considerations relevant to DAP/TCP Guides.

ASIC will retain INFO 225 as the primary guidance on when digital assets themselves are financial products. Exchanges that already hold an AFS licence following INFO 225 will still likely need to vary their licence to add DAP authorisations (if applicable).

ASIC proposes to make asset-holding standards under section 912BE of the Corporations Act, modelled on existing custody regimes (including the IDPS and custodial and depository services instruments). 

Key standards include:

• holding arrangements: underlying assets must be held on trust, under another arrangement that is legally effective and provides reasonably effective protection on insolvency, or under the client property provisions where they apply. Where foreign law is relevant, operators must assess and record its effect;
• safeguarding and segregation: accurate records, segregation and reconciliation of client assets and money, with additional requirements where assets are pooled;
• use of client assets: client assets may not be used (for example, lent or staked) unless consistent with the holding arrangement, clearly disclosed and expressly authorised by the client, and without materially impairing redemption rights;
• third-party custodians: operators remain responsible for compliance where they outsource custody and must assess, monitor and contract appropriately with custodians and sub-custodians; and
• wallet reporting: operators must keep records of wallet structures and addresses for at least seven years and report wallets and addresses holding client assets to ASIC quarterly. Private keys and seed phrases will not be requested.

Notably, ASIC does not propose to require domestic custody, and the standards will operate concurrently with the client money and client property provisions in Pt 7.8 of the Corporations Act. ASIC is also seeking feedback on debanking challenges in maintaining compliant client money accounts.

ASIC proposes to make transactional and settlement standards under section 912BF of the Corporations Act, which will apply proportionately depending on whether a DAP acts as agent, as principal counterparty, or as a neutral trading venue. Custody-only DAPs (ie. those that do not undertake transaction or settlement functions) and most TCP operations fall outside their scope. 

Key proposals include:

• core obligations: seven-year record-keeping of client instructions and trading messages, fair, orderly and transparent order matching, fair and effective settlement arrangements, and best execution obligations (including access to at least two liquidity sources) for DAPs executing client orders elsewhere;
• asset admission and conflicts: arrangements for assessing which tokens may be listed, conflicts management for tokens issued by the operator or related entities, a prohibition on order matching DAPs (and related bodies corporate) trading as principal through the platform except in limited cases, and a ban on accepting ‘shelf space’ fees to favour particular tokens;
• transparency: public disclosure of fees and liquidity providers, monitoring of market makers and real-time, free pre-trade (for order books) and post-trade transparency; and
• trading misconduct: platform rules must prohibit misconduct, operators must have adequate surveillance and intervention arrangements, and operators must notify ASIC when they suspend or terminate a client due to suspected misconduct.

Transactions in tokenised tangible property (such as gold) and tokenised physically settled derivatives that are not financial products are carved out of the transactional settlement standards. 

All licensees providing financial services in relation to DAPs and TCPs will be subject to solvency and positive net assets requirements, together with surplus liquid funds requirements where they hold client money or transact as principal. DAP and TCP operators will also face tailored cash needs (quarterly 12-month cashflow projections) and audit requirements, mirroring those for, broadly, IDPS operators.

The most significant proposal is an NTA requirement for operators, for which ASIC has proposed three alternative models:

• model 1: operators meeting the third-party custody conditions must hold NTA of the greatest of $200,000, 0.5% of average underlying assets held (up to $7 million) or 10% of average revenue. Otherwise, operators must hold the greater of $14 million or 10% of average revenue.
• model 2: as for Model 1, but with an intermediate tier for operators that never hold underlying assets that are financial products, requiring the greater of $7 million or 10% of average revenue.
• model 3: retains the third-party custody concession but otherwise sets a base of the greatest of $2 million, 0.5% of average underlying assets held (up to $14 million) or 10% of average revenue, plus an activity-based add-on of $500,000 (agent), $750,000 (neutral trading venue) or $1 million (trading as principal).

Under each model, thresholds would be indexed annually to CPI, and the third-party custody concession requires written assurance and audit reports from the custodian confirming it holds the NTA the operator would otherwise need. 

ASIC proposes to update INFO 225 to address other DAF Act changes, including the exemptions for public digital token infrastructure (PDTI) and related digital assets, wrapped tokens and custodial staking arrangements. 

ASIC notes that infrastructure where only select persons can conduct consensus activities is not PDTI, and that licensing requirements are assessed at a point in time, not based on an expected future state.

ASIC proposes that ‘restricted stablecoins’, being stablecoins issued, held or possessed by the licensee, an associated entity or an entity under common control, cannot be used to satisfy NTA requirements. 

Stablecoins that are not issued by any associate of the operator and are held on the operator’s behalf by a third-party custodian will not be restricted stablecoins and can otherwise be used for the purposes of meeting the NTA requirement if they meet the requisite definitions. 

This applies to all AFS licensees, not only those in the digital asset sector. Exchanges and groups that issue their own stablecoins or hold stablecoins in-house will need to factor this into their capital planning.

ASIC is seeking information on compliance costs, effects on competition and other impacts to inform its ‘Policy Impact Analysis’.