The Australian Securities and Investments Commission (ASIC), one of Australia’s top financial regulators, reported that the use of Artificial Intelligence, was flagged to be risky in both regulatory uncertainty and cybercrime, publishing a report on likely risk emergences for 2026. The rapid advances in AI are transforming financial services and putting businesses and consumers at risk.
AI Raises New Challenges in Financial Services
The advancement of AI is dividing, on one hand automated processes lead to more efficiency, real time fraud detection, and less avenue for “human error”. On the other hand, it also poses a threat due to the rise of AI-powered cybercrime that is already affecting the market.
The rapid adoption of technology has exposed consumers to greater risks, as behavioral biases are increasingly exploited through automated decisions and digital interactions that amplify scams.
With more people using new technologies without prior knowledge, financial innovations are advancing faster than the rules designed to govern them. This imbalance creates vulnerabilities that regulators are now trying to address.
ASIC has urged directors and financial services license holders to strengthen their risk management frameworks, review the security of their operations, and ensure proper oversight of third‑party providers. Regulators must also determine which new products require licensing and prevent companies from evading responsibility, making sure consumers understand what is regulated and what is not.
Lack of AI Regulations Creates Uncertainty
The absence of clear regulation has contributed to ASIC’s report highlighting ambiguity in the digital asset sector in its “Key Issues Outlook 2026.” At present, Australia has no legislation specifically governing artificial intelligence.
In September 2024, however, the Department of Industry, Science and Resources released a proposal paper outlining guardrails for AI in high‑risk settings. The proposal would require developers and deployers to implement safeguards against potential harms, signaling the government’s intent to establish a framework for responsible AI use.
Digital Assets Remain Within a Regulatory Gray Area
Although Australia lacks crypto‑specific legislation, digital assets are currently regulated under the Australian Financial Services License (AFSL). Cryptocurrency exchanges, wallet providers, and platforms offering financial services must obtain an AFSL and comply with its general obligations.
Yet the classification of digital assets remains case‑by‑case. Depending on circumstances, tokens may be treated as investments, securities, derivatives, or financial products. If they fall into these categories, AFSL rules apply. But many assets do not fit neatly into existing definitions, leaving gaps that allow businesses to operate outside licensing requirements.
Australia’s Current Rules and the Proposed Digital Assets Framework Bill
In November 2025, Parliament introduced the Digital Assets Framework Bill to establish crypto‑specific regulatory categories. The bill aims to close gaps, strengthen consumer protection, and ensure businesses holding digital assets meet consistent standards.
It proposes two new categories: Digital Asset Platforms, where operators hold tokens for themselves or clients, and Tokenized Custody Platforms, where operators hold assets other than money and issue digital tokens representing ownership or redemption rights. Businesses in these categories would be required to comply with AFSL obligations.
The bill has passed its second reading in the House of Representatives but has not yet progressed further. For now, digital assets and AI remain under ASIC’s watch list, with regulators continuing to monitor developments while the legislative process unfolds.
Australia’s regulatory landscape for digital assets and artificial intelligence remains in flux, with ASIC continuing to highlight the risks of rapid technological adoption outpacing existing rules. The absence of clear AI legislation and the ambiguity surrounding digital assets under current financial services law create uncertainty for businesses and consumers alike. While the proposed Digital Assets Framework Bill represents a step toward closing regulatory gaps, its slow progress underscores the challenges of aligning innovation with oversight.
