Australia ASIC Tokenized Fund Regulatory Approach

ASIC’s Evolving Framework for Tokenized Fund Products

The Australian Securities and Investments Commission (ASIC) regulates Australia’s AUD 4.2 trillion managed fund industry, including the rapidly growing ETF market (AUD 230 billion in assets as of December 2025). ASIC’s approach to tokenized fund products combines existing managed investment scheme regulation with specific digital asset guidance through Information Sheet 225 (Crypto-assets) and engagement through the Enhanced Regulatory Sandbox.

Managed Investment Scheme Framework

Australian fund products are structured as managed investment schemes (MIS) under Chapter 5C of the Corporations Act 2001. The responsible entity (RE) of a MIS holds an Australian Financial Services License (AFSL) and is subject to ASIC oversight. Tokenized fund products — where MIS units are issued as blockchain tokens — must comply with all existing MIS requirements, including: responsible entity governance and compliance; custodial arrangements through approved custodians; disclosure through Product Disclosure Statements (PDS); and member (investor) rights under the Corporations Act.

ASIC has consistently confirmed that tokenizing MIS units does not create a new or distinct product type for regulatory purposes — the tokenized units remain interests in a MIS subject to existing regulation. This interpretation parallels the SEC’s implicit acceptance of tokenized fund shares as functionally equivalent to traditional shares — an approach that has supported the tokenized treasury market’s growth to $11.70 billion across 73 products and 55,520 holders globally by March 2026, led by BlackRock’s BUIDL ($2.01 billion), Franklin Templeton’s BENJI ($1.01 billion), and Ondo Finance’s USDY ($1.21 billion). In the EU, 53+ MiCA CASPs have been licensed as of late 2025, and the DLT Pilot Regime was extended through December 2025 to broaden institutional participation in tokenized securities infrastructure testing.

Enhanced Regulatory Sandbox

ASIC’s Enhanced Regulatory Sandbox (ERS), operational since September 2020, permits fintech businesses to test innovative financial products and services for up to 24 months with reduced licensing requirements. Several tokenized fund-related proposals have entered the sandbox:

• A tokenized agricultural commodity fund using blockchain for investor access and settlement
• A tokenized real estate fund platform enabling fractional ownership through DLT
• A tokenized money market product targeting institutional cash management

The sandbox provides ASIC with operational evidence about tokenized fund risks and benefits, informing the Commission’s approach to permanent regulatory frameworks. Sandbox participants must satisfy investor protection conditions — including compensation arrangements and disclosure requirements — while operating under modified licensing terms.

Crypto Asset Regulatory Framework

ASIC’s Information Sheet 225 (IS 225), published in May 2022 and updated in October 2023, provides guidance on when crypto-assets constitute financial products under Australian law. IS 225 confirms that: tokens representing interests in a managed investment scheme are financial products; tokens conferring rights similar to securities (shares, debentures) are financial products; and tokens facilitating payment or operating as non-cash payment facilities may be financial products.

For tokenized fund shares, IS 225 confirms that the tokenization wrapper does not alter the regulatory classification — tokenized MIS units are financial products requiring AFSL authorization for their issue, sale, and custody.

ASX Digital Asset Infrastructure

The Australian Securities Exchange (ASX) abandoned its CHESS replacement project (which would have used DLT for equities settlement) in November 2022, citing technical challenges and cost overruns. This high-profile failure has influenced ASIC’s cautious approach to DLT infrastructure for listed products, including ETFs.

However, ASX has subsequently explored DLT applications for specific use cases, including tokenized fund settlement. ASX’s revised technology strategy includes modular DLT components that could support tokenized ETF listing and settlement, though timelines remain uncertain.

The comparison of Asia-Pacific regulatory approaches positions Australia as a jurisdiction with strong regulatory infrastructure but cautious implementation timelines for tokenized fund products.

Custodial Requirements for Tokenized Fund Assets

ASIC’s Regulatory Guide 133 (RG 133) sets out the custodial requirements for managed investment schemes, including requirements for independent custody, asset segregation, and operational controls. For tokenized fund products, RG 133’s requirements translate into specific digital asset custody obligations:

Independent custody mandate: MIS assets — including tokenized fund shares and any on-chain collateral — must be held by an approved custodian independent of the responsible entity. This independence requirement prevents the operational risk concentration that would arise if the fund manager controlled both the investment portfolio and the private keys governing tokenized share transfers.

Asset segregation on-chain: Custodians holding tokenized MIS units must maintain wallet-level segregation between client assets and the custodian’s own assets. ASIC expects custodians to demonstrate that their wallet architecture prevents commingling, using either dedicated wallets per scheme or sub-account segregation with verifiable on-chain proofs.

Key management standards: While ASIC has not issued tokenization-specific key management guidance, the Commission’s broader operational resilience expectations (Regulatory Guide 259) require responsible entities to maintain business continuity and disaster recovery arrangements that extend to the technology infrastructure supporting tokenized share operations. For digital asset custody, this implies multi-signature wallet architectures, hardware security module (HSM) key storage, and documented key recovery procedures.

Australian custodians operating in the tokenized fund space — including the Big Four banks’ custody divisions and specialist providers — are developing capabilities aligned with these requirements. The qualified custodian requirements analysis examines custodial standards across jurisdictions, including the Australian framework.

Tax Treatment of Tokenized Fund Units

The Australian Taxation Office (ATO) has issued guidance on the tax treatment of digital assets, including its position that tokenized fund units are taxed identically to traditional fund units. For investors in tokenized managed investment schemes:

• Income distributions: Distributions from tokenized MIS are taxed as income or capital gains according to the same rules as traditional MIS distributions. The tokenization wrapper does not alter the character of the distribution for tax purposes.
• Disposal of units: The sale or redemption of tokenized MIS units triggers capital gains tax (CGT) under the same rules as traditional fund unit disposals. The ATO treats blockchain-based transfer as equivalent to off-chain transfer for CGT purposes.
• GST treatment: Financial supplies — including the issue, transfer, and redemption of tokenized fund units — are input-taxed under Australia’s Goods and Services Tax framework, consistent with the treatment of traditional fund units.

This tax neutrality between tokenized and traditional fund units removes one potential barrier to adoption, contrasting with jurisdictions where the tax treatment of tokenized ETF shares remains uncertain.

Wholesale vs. Retail Distribution

ASIC distinguishes between wholesale (professional) and retail investors for MIS distribution purposes. Products distributed to retail investors require a Product Disclosure Statement (PDS) lodged with ASIC, ongoing disclosure obligations, and compliance with the Design and Distribution Obligations (DDO) framework introduced in October 2021.

For tokenized fund products, the DDO framework requires responsible entities to define a target market determination (TMD) that specifies the investors for whom the tokenized product is appropriate. The TMD must address: the investor’s investment objectives and financial situation; whether the investor understands the technology-specific risks of tokenized fund shares (smart contract risk, network risk, key management risk); and the distribution channels through which the tokenized product is offered.

Several tokenized fund proposals in the Enhanced Regulatory Sandbox have limited distribution to wholesale investors to avoid the retail DDO requirements, consistent with the approach taken in Hong Kong (where the ChinaAMC tokenized money market ETF launched February 28, 2025, reaching $546.1 million as the first retail-accessible tokenized fund in Asia-Pacific) and Singapore (where Project Guardian now includes over 40 financial institutions) where initial tokenized fund offerings targeted professional investors before expanding to retail. The MiFID II distribution rules in the EU create a comparable product governance framework that fund sponsors must satisfy for cross-border tokenized fund distribution.

Relationship to European and US Frameworks

Australia’s approach to tokenized fund regulation shares structural similarities with several other jurisdictions while maintaining distinctive features. Like the EU’s UCITS framework, the Australian MIS framework was designed for traditional fund operations and requires interpretation — rather than amendment — to accommodate tokenization. Like the SEC’s approach, ASIC has not issued dedicated tokenized fund rules, instead relying on existing frameworks with technology-neutral application.

Australia’s Enhanced Regulatory Sandbox provides an experimentation pathway comparable to the EU DLT Pilot Regime and the regulatory sandbox approaches adopted by Singapore and the UAE. However, the ERS has shorter time limits (24 months) and fewer participants than the EU Pilot Regime, potentially limiting the operational evidence base available to ASIC.

For fund sponsors evaluating Australia as a domicile for tokenized products, the key consideration is timing: ASIC’s regulatory framework is capable of accommodating tokenized fund products under existing law, but the absence of specific guidance and the slow pace of sandbox progression means that Australia will likely follow rather than lead in tokenized fund product launches.

Australian Institutional Adoption and Market Participants

Several Australian institutional market participants have advanced tokenized fund capabilities despite the absence of specific ASIC guidance:

ANZ Bank: ANZ issued the first Australian dollar stablecoin (A$DC) on Ethereum in March 2023, demonstrating institutional blockchain capabilities that extend to tokenized fund settlement. ANZ’s digital asset unit has explored tokenized fund settlement using A$DC as the payment instrument, providing a potential Australian dollar settlement rail for tokenized managed investment schemes.

Perpetual Limited: One of Australia’s largest fund administrators (AUD 230 billion in assets under administration), Perpetual has invested in DLT capabilities for fund administration, including blockchain-based share register management and automated compliance monitoring. Perpetual’s integration of blockchain technology into its existing fund administration platform positions it to service tokenized MIS products when ASIC regulatory clarity permits.

Macquarie Group: Macquarie’s digital asset initiatives include participation in industry working groups on tokenized securities infrastructure and investment in blockchain technology companies. Macquarie’s fund management and custody capabilities position it as a potential service provider for tokenized fund products in the Australian market.

ASX and Chi-X Australia: Both Australian exchange operators are monitoring DLT developments for potential application to listed fund products. Chi-X Australia (now Cboe Australia) has expressed interest in tokenized ETF listing capabilities, potentially creating competitive dynamics that accelerate exchange infrastructure development for tokenized fund products.

These institutional developments demonstrate that Australian market infrastructure is preparing for tokenized fund products, with the regulatory framework — rather than institutional capability — representing the primary constraint on product launch timing.

ASIC’s Supervisory Technology Capabilities

ASIC has invested in supervisory technology (suptech) capabilities that support oversight of tokenized fund products. The Commission’s Market Surveillance System monitors trading activity on ASX and other licensed markets, and ASIC has engaged with blockchain analytics firms to develop on-chain monitoring capabilities. These capabilities could support surveillance of tokenized ETFs listed on the ASX, complementing traditional market surveillance with blockchain transaction monitoring.

ASIC’s Corporate Plan 2024-2028 identifies digital assets as a strategic priority, with planned supervisory enhancements including: on-chain monitoring for registered schemes; automated compliance checking for tokenized product disclosures; and real-time NAV verification for tokenized fund products using public blockchain data.

ASIC’s investment in blockchain analytics partnerships has enabled the regulator to monitor on-chain fund operations in real-time — tracking token transfers, verifying NAV calculations against oracle price feeds, and identifying potential compliance breaches through automated surveillance. These capabilities position ASIC to supervise tokenized fund products effectively once regulatory frameworks are established, reducing the risk that supervisory capacity constraints would delay product authorization or limit the scope of regulatory approval.

The Australian Treasury’s consultation on crypto-asset regulation (published September 2024) proposed bringing digital asset exchanges and custody services within the AFSL framework, which would provide the regulatory foundation for tokenized fund service providers. The consultation’s proposed approach — extending existing AFSL requirements to digital asset activities rather than creating a separate licensing regime — aligns with ASIC’s technology-neutral regulatory philosophy and would simplify the authorization pathway for tokenized fund products.

The development of these supervisory capabilities will influence the pace at which ASIC moves from sandbox-based experimentation to permanent regulatory authorization for tokenized fund products. The ESMA and SEC have undertaken similar suptech investments, reflecting a global recognition among regulators that effective oversight of tokenized fund products requires technology-enhanced supervision. ASIC publishes its regulatory framework and consultation documents at asic.gov.au. The FCA’s Digital Securities Sandbox provides a comparable UK approach that Australian regulators are monitoring closely.

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