Stablecoins and wrapped tokens sit at the centre of Australia’s digital asset ecosystem, yet neither is regulated by a purpose-built law. Only recently has industry received clarification on how existing financial services law treats them today, and now that is set to change following the passage of the reforms.
Need to know
- ASIC’s current position under Information Sheet 225 (INFO 225) is that a non-yield-bearing stablecoin is likely to be a non-cash payment facility (NCPF), while a wrapped token is likely to be a derivative, in each case triggering an Australian financial services licence (AFSL) requirement.
- The ASIC Corporations (Stablecoin and Wrapped Token Relief) Instrument 2025/867, together with ASIC’s class no-action letter (updated 25 June 2026), provide interim relief and a further transitional bridge for eligible stablecoin and wrapped token businesses, easing the transition to AFSL, market licence and disclosure obligations while the new regime is finalised.
- The proposed reforms to Australia’s payments regulation will regulate payment stablecoins through a new tokenised stored value facility (TSVF) concept, while reforms to digital asset regulation passed earlier this year will likely treat wrapped tokens as tokenised custody platform (TCP) arrangements rather than derivatives, once they come into effect.
What are stablecoins and wrapped tokens?
Stablecoins and wrapped tokens are two commercially significant categories of digital asset that serve different purposes. Stablecoins aim to maintain a stable value relative to a reference asset, most commonly a fiat currency, though the term is also used for tokens referencing commodities or other assets. Stablecoins fall into four broad categories: fiat-collateralised (backed 1:1 by fiat reserves); crypto-collateralised (backed by other, usually over-collateralised, crypto-assets); algorithmic (managing supply and demand via smart contracts without direct backing, and prone to high-profile failures); and commodity-backed (referencing physical assets such as gold). In Australia, “stablecoin” increasingly refers to fiat-collateralised tokens, while “asset-backed” refers to commodity-backed tokens. In this article, we are only referring to fiat-collateralised tokens.
Wrapped tokens instead facilitate cross-chain interoperability, letting a crypto-asset native to one blockchain be represented, with added functionality, on a different blockchain. Typically, a holder sends the native token to the issuer’s address on the native blockchain, and the issuer issues a corresponding wrapped token to the holder on the second blockchain. Its price tracks the native token, though the two may trade at slightly different prices, and holders can redeem the native token by “burning” the wrapped token. Wrapped Bitcoin (WBTC) representing Bitcoin on Ethereum is a well-known example.
What is the current position?
How does ASIC currently regulate stablecoins and wrapped tokens?
Stablecoins
The analysis for stablecoins is complex, given the variety of stabilisation mechanisms that are in use. ASIC’s position is that a non-yield-bearing stablecoin is likely a non-cash payment facility (NCPF), meaning a financial product through which a person makes, or causes to be made, payments other than by physical delivery of currency. In ASIC’s worked example in INFO 225, an AUD- or USD-pegged, redeemable, non-yield-bearing stablecoin is an NCPF because one of its intended, widespread uses is that ownership can be transferred from a client to a merchant as an effective means of payment. Its non-yield-bearing, fully-backed features make it unlikely to instead be a managed investment scheme or derivative.
Where a stablecoin is found to be an NCPF, it will generally require an AFSL. A markets licence may also be required if the business operates an order book.
Wrapped tokens
ASIC’s current position in INFO 225 is that wrapped tokens are a derivative under the Corporations Act 2001 (Cth) (Corporations Act), because the value of the arrangement is ultimately determined, derived from, or varies by reference to the value of the native coin. This view has not been tested in the courts. An alternative view treats the arrangement as custody, with the wrapped token merely evidencing ownership of an underlying custodied token – which is the approach Treasury’s proposed reforms adopt. Until those reforms commence, relying on that alternative view carries risk, as it does not align with ASIC’s published position.
Because wrapped tokens are generally treated as derivatives by ASIC, an issuer will usually need an AFSL. It may also require a markets licence if it operates an order book.
Transitional relief for distributors
Because both stablecoins and wrapped tokens are proposed to have different treatment in the near future due to reforms that have passed, or are proposed to be passed, ASIC has given interim relief under ASIC Corporations (Stablecoin and Wrapped Token Relief) Instrument 2025/867. The relief is available to distributors, persons other than the issuer such as exchanges, dealing with eligible stablecoins and wrapped tokens. Eligible distributors are exempt from needing an AFSL for general advice, dealing, market-making and custodial services, and from needing a market or clearing and settlement facility licence solely because the token is a financial product. Certain disclosure requirements are also relaxed for issuing eligible wrapped tokens.
The relief does not extend to issuers, who must hold an AFSL (or have applied for one prior to 30 September 2026). For stablecoins, in order for the distributor to be exempt, the issuer must confer a redemption right to holders of the stablecoin to redeem it for Australian currency and maintain matching reserves, held separately and used only for redemption and disclosed fees. For wrapped tokens, the issuer must confer a redemption right to holders of the wrapped tokens to redeem it for the underlying digital asset, backed by reserves held on the same segregated basis. Distributors relying on the retail client exemption must provide the issuer’s current Product Disclosure Statement and be reasonably satisfied the issuer holds an AFSL, has applied for one by 30 September 2026, or is an exempt foreign issuer.
A further bridge: ASIC’s class no-action letter
ASIC has also issued a class no-action letter (updated 25 June 2026) addressing the broader transition to licensing for digital asset financial services. Where its conditions are met – broadly, the person was already providing the service in Australia by 31 December 2025 and has lodged a licence application by 30 September 2026 – ASIC does not intend to take action for failing to hold an AFSL, market licence, or clearing and settlement facility licence.
While the no-action letter excludes NCPFs and derivatives generally, stablecoins and wrapped tokens are each then carved back into scope. Eligible distributors can therefore rely on this letter for conduct that predated the 2025/867 relief, while issuers can rely on it for conduct before 30 September 2026 (when they must lodge an AFSL) and subsequently while their licence applications progress. Note that it is only a statement of ASIC’s present intentions, not a legal ruling, and may be withdrawn or revised at any time.
Where is the law heading?
Stablecoins
The proposed payments reforms will introduce a new financial product, the tokenised stored value facility (TSVF), to capture payment stablecoins. A TSVF is a stored value facility where the right to redeem a fixed amount of funds, denominated in a single currency, is attached to a digital token. Under this model, the stablecoin itself would not be the regulated product; the underlying facility within which the stablecoin operates is, and a person only acquires the TSVF on entering the arrangement with the issuer of the facility as a client, not by merely receiving the token. This is a significant departure from ASIC’s current position, which treats the stablecoin itself as the NCPF.
Wrapped tokens
For wrapped tokens, the digital asset reforms are expected to move them away from the derivative classification. Instead, it is expected that issuers may be regulated as operating a TCP – a facility where the operator identifies an underlying asset, creates a digital token conferring a right to redeem or direct delivery of it, and holds the asset on the token holder’s behalf. This reflects the custody-based analysis of wrapping arrangements, rather than treating price correlation with the native asset as itself creating a derivative.
TCPs would be added to the definition of financial product (except where the arrangement is a managed investment scheme), and dealing in a TCP will generally require an AFSL, subject to low-value and incidental activity exemptions. A TCP that tokenises financial products would not need a separate custodial authorisation to hold them, avoiding a duplicated licensing burden.
What this means for issuers and distributors of stablecoins and wrapped tokens
The digital asset reforms are set to commence on 8 April 2027. However, the payments reforms have not yet passed Parliament (though this is anticipated to occur in early 2027). Until then, stablecoins remain generally treated as NCPFs, and wrapped tokens as derivatives, each requiring an AFSL where there is no applicable exemption. The 2025/867 instrument and ASIC’s class no-action letter together offer a practical, but partial and time-limited, bridge for eligible businesses.
Businesses issuing or distributing stablecoins or wrapped tokens in Australia should reassess their licensing position now, monitor the reforms closely, and prepare for a materially different model – one that regulates the facility behind a stablecoin, and the custody arrangement behind a wrapped token, rather than the token itself.
Hamilton Locke’s Funds & Financial Services team is advising clients across the digital assets sector on structuring, licensing and readiness ahead of the new reforms.
For more information, please contact Jaime Lumsden.
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