Introduction
In recent years, in compliance discussions concerning crypto payment and stablecoin projects, the Australian DCE (Digital Currency Exchange) has often been regarded as a relatively "friendly" entry path: no financial licence is required, and an entity may engage in exchange between cryptocurrencies and fiat currency simply by completing registration with AUSTRAC and establishing an anti-money laundering system.
However, if this understanding is carried forward atthe 2026juncture, judgments will often be skewed. This is because what is happening in Australian regulation is not an adjustment to any single "licence", buta reconstruction of the overall regulatory logic for virtual asset services.
The question that truly needs to be answered has shifted from "is the DCE easy to operate" to:Under the new regulatory structure, where does the DCE stand? What problems can it still solve, and what problems can it clearly not solve?
The current legal positioning of the Australian DCE: an anti-money laundering regulatory status, not a financial licence
Under the current regime, the legal basis for the so-called "Australian DCE" derives primarily from the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and its accompanying rules. From a legal-structure perspective, a DCE is not a financial services licence within the meaning of the Corporations Act 2001, nor does it mean that the entity is recognised as a financial institution. Its essence is:When an entity provides exchange services between digital currency and fiat currency for others, it is brought within AUSTRAC's anti-money laundering regulatory system and becomes a reporting entity.
The focus of this type of regulation is very clear:
- whether the enterprise identifies its customers (KYC/CDD);
- whether it is able to monitor transactions and identify anomalies;
- whether it fulfills continuing obligations such as suspicious transaction reporting.
At this stage, AUSTRAC does not make value judgments about the business model itself, nor does it review whether an enterprise is "suitable" to engage in that type of business. The regulatory logic is a typicalex post regulatory approach:the market is first allowed to operate, and deviations are then corrected through enforcement, audits and penalties. It is against this institutional background that DCEs have long been used by crypto payment, OTC, stablecoin receipt and payment and other projects as a compliance "entry point".
Key changes in 2026: AML/CTF framework upgrade and the "registration confirmation" mechanism
The real turning point comes from Australia's systemic revision of its AML/CTF regime. At the end of 2024, Australia passed the AML/CTF Amendment Act 2024, and the Department of Home Affairs and AUSTRAC have driven updates to the supporting rules, expressly bringing virtual asset-related designated services more systematically within the anti-money laundering regulatory framework. According to the implementation arrangements that have been announced,the key reform milestone relating to virtual assets is 31 March 2026.This round of reform brings at least three substantive changes:
First, the regulatory object expands from "individual DCEs" to "the set of virtual asset services".Fiat currency and cryptocurrency exchange remains regulated, but is no longer the sole core. Conduct such as exchanges between virtual assets, value transfers and payment execution has all been brought within AUSTRAC's risk assessment and regulatory scope.
Second, the regulatory approach has shifted from after-the-fact to before-the-fact.Under the new framework, completing enrolment alone is no longer sufficient to confer eligibility to conduct business. For the relevant virtual asset services, entities must obtain AUSTRAC'sregistration confirmation, and may not provide services before such confirmation.
Third, the compliance focus has shifted from "whether registration has been obtained" to "whether sustainable compliance capability exists".What AUSTRAC focuses on is no longer merely formal compliance documents, but whether an entity truly understands its own service types, fund flows and risk exposures, and has the capability to continuously perform its AML/CTF obligations.
This means that the room for the past approach of "launch first, make up compliance later" has been significantly compressed at the institutional level.
The changing role of the DCE: from "passport" to "service-type label"
Under the new AML/CTF structure, the DCE will not be abolished, but its legal significance has changed. Before 2026, "whether one held a DCE registration" was almost equivalent to "whether one could lawfully conduct crypto exchange business in Australia"; after 2026, the more accurate positioning of the DCE is asa specific service type within AUSTRAC's virtual asset service regulatory system.Whether an entity can lawfully conduct business depends on three more substantive questions:
- what virtual asset-related services were actually provided;
- whether registration confirmation has been obtained for these services;
- whether the corresponding AML/CTF framework matches the risks of the services.
In this context, emphasizing solely whether a DCE exists is no longer sufficient to fully describe an enterprise's compliance status.
The second regulatory track: why ASIC intends to introduce a "digital asset platform and custody" framework
If AUSTRAC's reform addresses "whether funds flow in a compliant manner," then the core question ASIC focuses on is:who holds and controls assets on behalf of clients, and who bears legal liability when risks materialize.This logic is concentrated in the "Regulating Digital Asset Platforms–Exposure Draft Legislation" released by the Australian Treasury in 2025. The draft proposes to amend the Corporations Act 2001 to expressly bring certain types of digital asset platforms and custody arrangements within the financial products and financial services regulatory framework. The regulatory approach adopted in the draft is not centered on "whether virtual assets are securities," but rather onfunction and controlIts key determinations are:
- whether private keys are held on behalf of clients;
- whether account balances or internal ledgers are managed;
- whether it has substantive control over asset transfers.
Once a business touches the above elements, the platform's legal role is no longer that of a mere technical intermediary or anti-money laundering obligor, but enters the category of financial services involving "managing assets on behalf of clients," which typically requires obtaining an AFSL and being subject to stricter conduct, governance and client asset protection requirements.
Australian virtual asset regulation in fact turns on this single dividing line
Australia adopts a highly function-oriented, tiered regulatory approach to virtual asset services; its core determination is not whether crypto assets are involved, but whetherthe platform has begun to manage and control assets on behalf of others.Where a business involves only theexchange, transfer or payment executionof virtual assets, its principal risk lies in compliance of fund flows, and the regulatory focus naturally falls on anti-money laundering and counter-terrorism financing. Such businesses may operate by completing registration with AUSTRAC, obtaining registration confirmation and continuously performing AML/CTF obligations.
However, once the business model evolves to holding private keys on behalf of clients, centrally managing assets, or creating client balance claims against the platform through account-based arrangements, the nature of the risk changes. At this point, clients' credit reliance on the platform becomes the core issue, and the relevant business no longer remains merely an anti-money laundering obligor but must be brought within the financial services regulatory framework led by ASIC and obtain an Australian Financial Services Licence (AFSL).
In other words,simple value transfer falls under AUSTRAC; once assets are managed on behalf of others, the business must enter ASIC's financial services regulatory track.This dividing line constitutes the fundamental logic of Australia's virtual asset regulatory system.
As of early 2026, is it still necessary to complete DCE registration now?
Against this backdrop, whether to "do DCE now" is no longer a yes-or-no question, but rather achoice of phased strategy.For enterprises that clearly plan to conduct genuine crypto asset exchange or payment business in Australia on a long-term basis and whose business model is already relatively clear, completing the current DCE registration in advance still has practical significance: it helps establish a compliance track record, run the AML/CTF system in advance, and lay the foundation for subsequent registration confirmation.
However, it must be clearly recognized that:the current DCE can only be regarded as a transitional foundation, not the final-state compliance after 2026.Regardless of whether registration is completed now, in the future it will be unavoidable to complete registration confirmation under the new framework and to accept more upfront regulatory review.
The core of the Australian path is not the DCE, but the regulatory logic itself
If a higher-level judgment is to be made on Australia's virtual asset regulation, the conclusion may be:Australia has not attempted to solve all problems with a single new license; instead, through functional layering, it is gradually bringing virtual asset services into the existing legal system.The DCE still exists, but it is merely an entry label within this system. What truly determines the compliance path is how an enterprise addresses key issues such as "exchange, transfer, custody and control rights" in its business design. After 2026, understanding the regulatory logic itself will be far more important than fixating on a particular registration or license.
Author of this article
Shao Jiadian, Partner at Mankun (Shenzhen) Law Firm. He graduated from the National University of Singapore and has previously served as a lawyer, head of compliance and risk management, and vice president of legal affairs at institutions including a Red Circle law firm, a central state-owned enterprise cross-border investment platform, and a hundred-billion-yuan fund of funds. He focuses on new economy sectors such as Web3.0 and is adept at creatively providing clients with one-stop solutions to legal and compliance needs, including global architecture setup for Web3 projects, license applications, project financing, real-world assets (RWA), and the establishment of crypto funds.
About Mankun
Mankun Law Firm was established in 2015 and is a boutique law firm in China focused on the Web3.0 new economy and deeply engaged in the blockchain industry. Members of the Mankun team possess uniquely diverse industry backgrounds, coming from well-known legal service institutions, state judicial organs, internet technology companies, crypto assets institutions, blockchain industry think tanks, and other organizations.
Based on a profound understanding of the new economy, continuous attention to and research on policies and regulations, and extensive practical experience, the Mankun team is adept at providing comprehensive legal services from the perspectives of business models and legal practice to new economy enterprises in areas such as Web3.0, blockchain, AI, NFTs, digital collectibles, crypto funds, crypto payments, DeFi, real-world assets (RWA), and GameFi, including business architecture design, project investment and financing, transaction planning, business compliance, resolution of complex civil and commercial disputes, prevention and control of criminal risks, and criminal defense.
Mankun Law Firm is headquartered in Shanghai and has branches in Hong Kong, China, Silicon Valley in the United States, Shenzhen, Hangzhou, Zhengzhou, Chengdu, and other locations. In response to the global compliance development needs of Web3.0 industry clients, Mankun has established local offices and selected local professional blockchain service partners in major global crypto finance cities to provide clients with professional legal and compliance services featuring global breadth and China depth.
