Australia’s financial regulator has identified regulatory gaps around digital assets as a critical risk for 2026, warning that rapid innovation in the crypto and fintech sectors continues to expose consumers and markets to unlicensed advice, misleading behavior and the exploitation of unclear regulatory boundaries.
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The Australian Securities and Investments Commission has identified emerging players in the financial sector, particularly in digital assets and payments, as well as users of artificial intelligence, as priority areas requiring enhanced perimeter monitoring.
ASIC said some entities are actively seeking to stay outside regulation, contributing to a perception of regulatory uncertainty that demands clearer licensing requirements and stricter oversight.
ASIC’s Key Issues Outlook 2026 report, released on Tuesday, highlighted that rapid innovation from participants unfamiliar with financial services rules continues to create risks in the crypto sector.
The regulator noted that while some businesses currently operate legitimately outside existing frameworks, it is ultimately up to the government to determine whether new product categories or services should fall under the licensing regimes.
The warning comes as Australia’s crypto adoption rate reached 31% in 2025, up from 28% the previous year, placing the country among the most crypto-engaged populations in the world.
Source: a16z
Self-managed superannuation funds have increased their crypto exposure sevenfold since 2021 to AU$1.7 billion, while major exchanges including Coinbase are preparing dedicated retirement account services targeting the country’s retirement pool.
Despite this growth, regulatory fragmentation persists.
ASIC Chairman Joe Longo warned in November that Australia was at risk of becoming a “land of missed opportunities“Unless it adapts to blockchain-based tokenization that is reshaping global markets.
“Australia must innovate or stagnate. Seize the opportunity or be left behind,” Longo told the National Press Club, noting that JP Morgan told him their money market funds would be fully tokenized within two years.
Parliament is currently debating the Digital Assets Framework for Corporations Amendment Bill 2025, introduced last November by Treasurer Jim Chalmers and Financial Services Minister Daniel Mulino.
The legislation would require crypto exchanges and custodial providers to obtain Australian financial services licenses, placing them under the supervision of ASIC, with potential penalties of up to 10% of annual turnover for breaching the rules.
The bill creates two new licensing categories for digital asset platforms and tokenized custody platforms, focusing regulation on the companies that control customer funds rather than the underlying technology.
Licensed businesses must comply with ASIC standards for transactions, settlement processes and custody of assets, while smaller operators processing less than A$10 million per year would be exempt.
Mulino said the reforms target companies controlling customer assets and warned that “It is currently possible for a company to hold an unlimited amount of customer cryptocurrencies without any financial legal guarantee.“
The government projects the framework could unlock A$24 billion in annual productivity gains while strengthening investor protections.
As permanent legislation progresses, ASIC has introduced temporary exemptions easing compliance burdens during the transition.
The regulator finalized class relief in December, allowing intermediaries to distribute certain stablecoins and wrapped tokens without a separate license until mid-2028, provided they maintain proper records and offer product disclosure statements to retail investors.
The relief extends to omnibus custody structures, widely adopted in traditional markets but previously limited to crypto.
ASIC has positioned the temporary measures as supporting responsible innovation pending broader digital asset reforms addressing tokenized payment and custody frameworks.
The regulator also adopted an industry-wide no-action stance until June 2026, giving companies time to review the updated guidance, file license applications or adjust their operations.
ASIC’s INFO 225 Guidelines have confirmed that many stablecoins, wrapped tokens, tokenized securities and digital asset wallets fall within existing rules on financial products requiring AFS licenses.
Beyond digital assets, ASIC has flagged nine other critical risks for 2026, including increased exposure of individuals to private credit markets, operational failures by superannuation administrators, cyberattacks undermining market confidence and potential failures of CHESS infrastructure.
The regulator highlighted that global regulatory divergences create increasing fragmentation that complicates compliance and risks unequal consumer protection across jurisdictions.
For now, Australia’s regulatory efforts aim to catch up with global competitors while addressing vulnerabilities that expose investors to fraud, operational failures and unclear legal protections.
Read original story Australia sees crypto regulation gaps as major risk for 2026 – What happens next? by Anas Hassan on Cryptonews.com
