Author: Lawyer Shao Jiadian

Introduction

In recent years, Australian DCEs (Digital Currency Exchanges) have often been seen as a relatively "friendly" entry point in compliance discussions regarding crypto payments and stablecoin projects: no financial license is required, and as long as registration is completed with AUSTRAC and an anti-money laundering system is established, one can conduct exchange services between cryptocurrencies and fiat currencies.

However, if we continue to hold this understanding from the perspective of 2026, judgments may often be skewed. This is because the regulatory changes in Australia are not merely adjustments to a specific "license," but rather a reconstruction of the overall regulatory logic for virtual asset services.

The real question that needs to be answered has shifted from "Is it good to operate a DCE?" to: What position does the DCE occupy under the new regulatory structure? What problems can it still solve, and what problems are clearly beyond its scope?

Current Legal Position of Australian DCEs: Anti-Money Laundering Regulatory Identity, Not Financial License

Under the current system, the so-called "Australian DCE" derives its legal basis 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 service license under the Corporations Act 2001, nor does it mean that the business is recognized as a financial institution. Essentially, it is: when a business provides exchange services between digital currencies and fiat currencies for others, it is incorporated into AUSTRAC's anti-money laundering regulatory system and becomes a reporting entity.

The focus of this type of regulation is very clear:

• Whether the business identifies its customers (KYC/CDD);

• Whether it can monitor transactions and identify anomalies;

• Whether it fulfills ongoing obligations such as suspicious transaction reporting.

At this stage, AUSTRAC does not make value judgments about the business model itself, nor does it assess whether the business is "suitable" to engage in such activities. The regulatory logic is a typical ex post (after-the-fact) regulation: first allowing the market to operate, and then correcting through enforcement, audits, and penalties. It is against this institutional backdrop that DCEs have long been used as a compliance "gateway" for crypto payments, OTC, and stablecoin transactions.

Key Changes in 2026: Upgrade of the AML/CTF Framework and "Registration Confirmation" Mechanism

The real turning point comes from Australia's systematic revision of the AML/CTF system. At the end of 2024, Australia passed the AML/CTF Amendment Act 2024, with the Ministry of Home Affairs and AUSTRAC promoting updates to accompanying rules, clearly incorporating virtual asset-related designated services more systematically into the anti-money laundering regulatory framework. According to the announced implementation arrangements, the key reform date related to virtual assets is March 31, 2026. This round of reform brings at least three substantial changes:

First, the regulatory target expands from "DCE single point" to "collection of virtual asset services." The exchange of fiat and cryptocurrencies remains regulated, but is no longer the sole core. Exchanges between virtual assets, value transfers, payment executions, and other activities are all included in AUSTRAC's risk assessment and regulatory scope.

Second, the regulatory rhythm shifts from after-the-fact to preemptive. Under the new framework, merely completing enrollment is no longer sufficient to grant business qualifications. For relevant virtual asset services, businesses must obtain registration confirmation from AUSTRAC, and may not provide services until confirmation is received.

Third, the compliance focus shifts from "Is there registration?" to "Does the business have sustainable compliance capabilities?" AUSTRAC is no longer just concerned with formal compliance documents, but whether the business truly understands its service types, funding paths, and risk exposures, and has the ability to continuously fulfill AML/CTF obligations.

This means that the previous space of "launch first, comply later" has been significantly compressed at the institutional level.

Change in the Role of DCEs: From "Pass" to "Service Type Label"

Under the new AML/CTF structure, DCEs will not be eliminated, but their legal significance has changed. Before 2026, "holding a DCE registration" was almost equivalent to "being able to conduct compliant crypto exchange business in Australia"; after 2026, the more accurate positioning of a DCE is as a specific service type within AUSTRAC's virtual asset service regulatory system. Whether a business can operate legally depends on three more substantive questions:

• What virtual asset-related services are actually provided;

• Whether these services have obtained registration confirmation;

• Whether the corresponding AML/CTF system matches the service risks.

In this context, merely emphasizing "Is there a DCE?" is no longer sufficient to fully describe a business's compliance status.

Second Regulatory Line: Why ASIC Introduces the "Digital Asset Platform and Custody" Framework

If AUSTRAC's reform addresses "whether funds flow compliantly," then ASIC's core concern is: Who is holding and controlling assets on behalf of clients, and who bears legal responsibility when risks occur? This logic is concentrated in the Exposure Draft Legislation on Regulating Digital Asset Platforms released by the Australian Treasury in 2025. The draft proposes to amend the Corporations Act 2001 to clearly include specific types of digital asset platforms and custody arrangements within the financial products and services regulatory framework. The regulatory approach adopted in the draft does not revolve around "whether virtual assets are securities," but rather focuses on function and control. The key judgments are:

• Whether private keys are held on behalf of clients;

• Whether account balances or internal ledgers are managed;

• Whether there is substantial control over asset transfers.

Once a business touches on these elements, the platform's legal role is no longer merely that of a technical intermediary or an anti-money laundering obligation subject, but enters the realm of "managing assets on behalf of clients," typically requiring an AFSL and subject to stricter conduct, governance, and client asset protection requirements.

The Core of Australian Virtual Asset Regulation Lies in This Watershed

Australia adopts a highly function-oriented layered regulation for virtual asset services, with the core judgment not being whether it involves crypto assets, but rather whether the platform has begun to manage and control assets for others. When the business only involves exchange, transfer, or payment execution of virtual assets, the main risk lies in the compliance of fund flows, and the regulatory focus naturally falls on anti-money laundering and counter-terrorism financing. Such businesses can operate by completing registration with AUSTRAC, obtaining registration confirmation, and continuously fulfilling AML/CTF obligations.

However, once the business model evolves to holding private keys on behalf of clients, centrally managing assets, or forming clients' rights to balances through account arrangements, the nature of the risk changes. At this point, clients' credit reliance on the platform becomes the core issue, and related businesses will no longer remain as anti-money laundering obligation subjects, but must be included in the financial services regulatory framework led by ASIC and obtain an Australian financial services license (AFSL).

In other words, for simple value transfers, it falls under AUSTRAC; once managing assets for others, it must enter ASIC's financial services regulatory track. This watershed constitutes the basic logic of Australia's virtual asset regulatory system.

As of Early 2026, Is It Still Necessary to Complete DCE Registration Now?

In this context, whether to "do DCE now" is no longer a binary question, but rather a strategic choice for the phase. For businesses that clearly plan to engage in real cryptocurrency exchange or payment services in Australia for the long term, and whose business models are relatively clear, completing the current DCE registration in advance still has practical significance: it helps establish a compliance history, operate the AML/CTF system early, and lays the groundwork for subsequent registration confirmation.

However, it must be clearly recognized that: the current DCE can only be seen as a transitional base, not the final compliance state after 2026. Regardless of whether registration is completed now, it will inevitably be necessary to complete registration confirmation under the new framework in the future and undergo more proactive regulatory scrutiny.

The Core of the Australian Path is Not the DCE, but the Regulatory Logic Itself

If we were to provide a higher-level judgment on Australia's virtual asset regulation, the conclusion might be: Australia is not attempting to solve all problems with a new license, but rather gradually incorporating virtual asset services into the existing legal system through functional layering. DCEs still exist, but they are merely an entry label within this system. What truly determines the compliance path is how businesses handle key issues of "exchange, transfer, custody, and control" in their business design. After 2026, understanding the regulatory logic itself will be far more important than getting caught up in a specific registration or license.

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