By Tom Whitfield

Australia's corporate regulator has opened a consultation on capital and custody requirements for crypto firms. The Australian Securities and Investments Commission (ASIC) is seeking industry input on how prudential and client-asset rules should apply to businesses holding digital assets, according to a consultation paper published by the agency.

The move marks the regulator's next step in translating crypto-asset service providers into its existing licensing perimeter. ASIC has asked market participants, licensed entities and consumer groups to submit views on capital adequacy and custody standards before any final rulemaking.

What does the consultation cover?

ASIC's review targets two structural questions: how much capital crypto firms should hold against operational and credit risk, and what custody obligations should govern firms that control client digital assets. Both areas carry direct cost implications for exchanges, custodians and brokers operating in the Australian market.

The consultation follows the Treasury's broader work on licensing digital asset platforms. ASIC has progressively issued guidance on token mapping and crypto-asset exchange-traded products over the past several years.

How does custody fit the existing framework?

Client-money rules under the Corporations Act already restrict how licensed firms handle customer funds. The open question is whether digital assets require additional safeguards — such as segregation of keys, proof-of-reserves reporting or cold-storage minimums — that traditional securities custody does not impose.

For custodians, capital requirements would determine the barrier to entry for new entrants and the compliance burden for incumbents. Firms that fail to meet the eventual standards face restrictions on their Australian financial services licences.

What comes next?

ASIC will weigh submissions before drafting final rules. Crypto firms operating in Australia now face a defined window to shape the calibration of capital and custody obligations before the regulator moves to enforcement of the new framework.