(As first published on Capital Brief__)
OPINION PIECE
Australia has taken an important first step in regulating digital assets. The passage of the initial tranche of payments and digital asset reforms through Federal Parliament is providing long-overdue clarity to platforms and custody providers, while also increasing protections for investors.
While these foundational regulatory measures are welcomed, the Federal Government must now look at creating fit-for-purpose regulation for stablecoins and payment processes to support digital asset transactions.
Our industry needs this, as regulatory certainty would allow compliant issuers to scale with confidence, attract more institutional partners and compete internationally under a framework designed for digital money, rather than requiring us to adapt to legacy systems.
Regulating rails is not the same as regulating money
Bringing digital assets under the AFSL framework is appropriate in regulating the “rails” of the digital asset ecosystem, which include custody providers, platforms and payment services. However, stablecoins were never designed to operate under existing payment rails and Australia’s regulatory frameworks have not kept pace with innovation.
Although stablecoins have been distinguished from other crypto assets by regulators, uncertainty remains regarding how different stablecoin arrangements should be classified and supervised. The key issue policymakers need to address is the ambiguity around classification in determining when a stablecoin is a payment facility, a financial product, or part of broader market infrastructure.
Payment stablecoins should be treated as financial infrastructure. The lack of a dedicated framework is already creating uncertainty for banks, institutions, exchanges and enterprise users considering stablecoin adoption.
For businesses, this increases compliance complexity, slows commercial partnerships and places Australian issuers at a disadvantage compared with jurisdictions such as Europe and Hong Kong which already have established tailored stablecoin regimes.
Australia cannot afford to lose jobs and new product innovations offshore because our regulatory frameworks have not kept pace with industry growth.
What Australia can learn from global peers
Australia does not need to reinvent the wheel when it comes to bespoke stablecoin legislation and we can draw from the successes of our global peers.
In the United States, the policy direction reflected in ongoing proposals such as the GENIUS Act, points towards federal oversight of stablecoin issuers, with a focus on reserves, redemption obligations and AML compliance. An approach like this would work for Australia, focusing on building on existing regulatory frameworks and providing a dedicated regime for payment stablecoins that complements the government’s broader digital asset reform.
This is not the only model Australia can draw from. Europe’s MiCA framework has introduced bespoke rules for asset referenced and e money tokens, providing legal certainty across a large, integrated market. Hong Kong is taking a similar approach, positioning itself as a regulated, permissioned hub for digital asset infrastructure.
The common component of these international policy measures is accountability for stablecoin issuers and a focus on treating them as financial instruments that support market operations, rather than as speculative cryptocurrencies.
Most importantly, these frameworks regulate the issuer and not every technical movement of a token on a blockchain. This principle is similar to how Australia is using the AFSL framework as the foundation of Australia’s digital asset reform, which focuses on regulating the business itself.
How Australia can deliver it
Drawing on these international examples, it is clear that a legislated and clearly defined stablecoin framework in Australia is needed to complement the newly passed foundational digital assets legislation.
This must include one to one reserve backing using reliable liquid assets, clear and enforceable redemption rights for token holders, segregation and safeguarding of customer assets to avoid commingling funds, and independent and transparent attestations of reserves.
The transition into the new regime will be as important as the regime itself, particularly in ensuring that compliant operators can continue to serve the market while licensing obligations are finalised. Without this coordination, even well intentioned reforms risk creating duplication and uncertainty which will force businesses to exit the market.
Beyond legislation, the government must also support industry growth by providing clear implementation roadmaps, coordinating regulatory oversight across agencies, encouraging participation in public sector pilot programs and fostering engagement between industry and regulators. Australia has an opportunity to become a regional leader in digital money, but that requires a policy environment that rewards compliance, innovation, and investment. Put simply, now that Australia has regulated the rails, we need to regulate the money that moves across them.
Why this matters now
Stablecoins are no longer a theoretical concept. AUDD alone has facilitated more than $2 billion in transaction volume to date, with strong year on year growth, which is a clear signal that demand for regulated, Australian dollar digital money is real and accelerating.
Australia has laid the groundwork for a regulated digital assets industry. The next phase of growth must be about building on this framework with a dedicated, payments aligned stablecoin policy that protects consumers, attracts capital and ensures digital money can be issued, redeemed and trusted onshore.