Australia’s new digital asset licensing regime: what it means and why insurance matters.
Overview
On 8 April 2026, the Corporations Amendment (Digital Assets Framework) Bill 2025, which brings key digital asset intermediaries into the existing Australian financial services regime, received Royal Asset. The Bill amends the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 to regulate digital asset platforms.
In practical terms, operators of digital asset platforms and tokenised custody platforms will be treated as providers of financial products and will need to operate within the Australian Financial Services Licence (AFSL) framework, rather than outside of it.
The policy intent is clear - regulate the entities that control customer assets and transactions, rather than attempt to regulate cryptocurrency itself as a standalone asset class.
The reform is aimed squarely at the risk points that have caused the significant harm in digital asset markets:
Custody failure;
Weak governance;
Poor disclosures;
Misleading conduct;
Inadequate safeguarding of client assets; and
Limited recourse when something goes wrong.
Treasury has said the new regime will subject these platforms to the same core standards expected across the broader financial system, including acting efficiently, honestly and fairly, maintaining governance and risk controls, providing clear customer disclosures, and offering dispute resolution and compensation mechanisms.
Smaller low-risk platforms are exempt where they fall below the stated thresholds.
The Corporations Amendment (Digital Assets Framework) Act provides an 18 month implementation period, and ASIC will be responsible for licensing, supervision and enforcement as required. ASIC have released a roadmap on the 20th of April (ASIC's roadmap for digital assets law reform implementation | ASIC (opens a new window)) including where further consulting from industry will be focused on, as well as when the transition window ends.
Whilst there is a longer implementation runway, affected organisations should not treat that as a reason to delay.
Strategically, this is a material step forward for the sector.
ASIC has already been signalling that digital assets should be approached through a functional, technology-neutral regulatory lens, with particular focus on intermediaries exercising practical control over client assets.
Treasury has linked the reform to a broader push to unlock institutional confidence and support innovation, citing research that Australia could capture up to A$24bn a year in productivity and cost savings from digital finance innovation if the right market structure and regulatory settings are in place.
Insurance relevance: PI and AFSL readiness
For organisations caught by this reform, the insurance issue is not simply “do we buy Professional Indemnity Insurance?”
The more important question is whether the organisation’s Professional Indemnity (PI)/financial lines programme is fit for an AFSL-regulated operating model.
ASIC’s guidance is clear that if a business provides financial services to retail clients, it must have compensation arrangements in place, with PI insurance being the primary means of compliance unless ASIC approves an alternative arrangement.
Retail-facing licensees also need compliant internal dispute resolution arrangements and Australian Financial Complaints Authority (AFCA) membership.
Just as importantly, ASIC does not treat PI adequacy as a box-ticking exercise.
Adequacy will likely turn on the amount of cover, scope, policy terms and exclusions, and the licensee’s own financial resources.
RG 126 states policies should respond to retail client loss arising from Chapter 7 breaches, including loss caused by negligent, fraudulent or dishonest conduct by the licensee or its representatives.
ASIC also warns that exclusions which undermine that minimum scope may make the cover inadequate.
The guidance further expects cover for representatives, at least one automatic reinstatement in most cases, retroactive continuity where there is an existing policy history, defence costs structured appropriately, and cover for AFCA awards.
From an insurance placement perspective, that means impacted organisations should review whether their PI wording is aligned to the actual AFSL authorisations sought, the client base served (retail vs wholesale), the services performed (exchange, dealing, arranging, custody, tokenised asset administration), and the firm’s use of representatives or outsourced functions. In practice, a “generic” PI placement may no longer be enough if the business is moving into a clearly regulated financial services perimeter.
Furthermore, unlike fiat currency and traditional assets, the prescriptive risks around the custodial exposure of these assets’ classes need to be reflected.
The decentralised nature of the underlying assets means that, in the event of theft, fraud, social engineering, or data loss, restitution is typically met either within the firms’ balance sheet or through insurable solutions as opposed to being able to have the assets returned from other organisations. [JT1]
This is important when meeting the expectations of ASIC especially for retail consumers.
Practical actions to take now
Affected organisations should start with a licensing and insurance gap analysis now, even if formal commencement is still ahead. Priority actions include:
Confirm whether the business model falls within a DAP or TCP category;
Map the exact AFSL authorisations likely to be required;
Review the PI and entire insurance programme against RG 126 adequacy criteria rather than against a generic market benchmark; and
Review policy wording, limits, excesses, retroactive structure, representative cover and AFCA-related responsiveness to assess whether they are consistent with an AFSL-regulated business profile.
For retail-facing operators in particular, the safest approach is to treat PI as a core part of licence readiness, not a downstream procurement item.
Contents of this publication are provided for general information only. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice, should not be relied on in that way and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. Lockton arranges the insurance and is not the insurer. Any insurance cover is subject to the terms, conditions and exclusions of the policy. For full details refer to the specific policy wordings and/or Product Disclosure Statements available from Lockton on request.
