Commentary

There has been a rapid expansion of cryptocurrencies, tokenised digital assets and blockchain-based financial services. There is currently a Bill before the Australian Parliament that focuses primarily on market regulation and custodial risk. This is the Corporations Amendment (Digital Assets Framework) Bill 2025. However, it is not the concern of this Bill to establish a new legal category of property. Instead, it regulates the technological mechanisms through which digital assets are controlled, held and traded.

Avoiding a Definition of Digital Assets as Property

A notable feature of the proposed Bill is that it does not create a new legal category of property called a ‘digital asset’. The Explanatory Memorandum indicates that the term ‘digital asset’ itself is not defined in Australian financial services law, and the reform deliberately avoids introducing such a definition. Instead, the Bill allows existing legal frameworks, including property law, contract law, and financial services law, to continue operating in relation to digital assets.

Under this approach, digital assets are conceptualised as bundles of rights associated with a digital token rather than as a distinct type of property. Whether those rights constitute property, contractual claims, or financial products depends on the particular arrangement underlying the digital token. This approach effectively sidesteps the philosophical debate in property law concerning whether intangible digital objects should be treated as a new form of property, even though courts around the world (including Australia) are leaning that way. Rather than attempting to resolve this conceptual issue, the Bill focuses on regulating how digital assets function within financial markets.

Introduction of the ‘Digital Token’

Instead of defining digital assets in terms of ownership (or more precisely legal title), the Bill introduces the concept of a digital token, defined as an electronic record that a person can:

• transfer,
• exclude others from transferring, and
• demonstrate that they can control.

This definition emphasises factual control rather than legal ownership (or legal title). The emphasis on control reflects the technological architecture of blockchain systems, where control of a private cryptographic key allows a person to initiate transactions and therefore exercise practical authority over the digital token. This approach highlights how blockchain technology shifts the legal focus from traditional concepts of ownership/title toward technologically mediated control.

By focusing on technological control, the Bill treats digital tokens functionally as rivalrous digital objects. In effect, the framework resembles the logic of bearer instruments, where possession of the instrument provides the practical ability to exercise associated rights. This analogy suggests that digital tokens may also be understood in law as a modern digital equivalent of traditional bearer assets such as banknotes or negotiable instruments.

Control and Possession

The Bill also implicitly equates control with possession for regulatory purposes. According to the Explanatory Memorandum, a person possesses a digital token if they have factual control over it. For example:

• a person who holds the private key controlling a digital token is treated as possessing that token;
• an exchange or custodian may possess digital tokens even if the beneficial owner (i.e. who has an equitable interest or claim) is a customer.

This approach reflects the technological realities of blockchain-based systems. Unlike traditional property, where possession often involves physical control over a tangible object, digital assets involve cryptographic control over a distributed ledger entry. The Bill therefore creates a technical notion of possession tied to blockchain control mechanisms.

Digital Assets as Bundles of Rights

Another important conceptual feature of the Bill is the characterisation of digital assets as bundles of rights attached to token possession. A ‘bundle of rights’ refers to the idea in property law that ‘ownership’ is not a single absolute right, but a collection of legal rights, such as the rights to use, transfer, exclude others, or derive value from an asset, that may be separated or allocated among different parties. For digital assets, these rights may arise from several legal sources, including:

• contractual arrangements,
• equitable interests,
• statutory provisions, or
• digital platform governance rules.

Different types of digital tokens may therefore embody different legal relationships. For example:

• Bitcoin: rights associated with control of the token itself.
• Stablecoin: contractual right to redeem fiat currency.
• Tokenised asset: claim to underlying property or financial instruments.
• Non-fungible token (NFT): proprietary rights (ownership) or licence rights linked to digital content.

Under this framework, the digital token effectively functions as a digital bearer instrument through which a range of legal rights may be exercised. This functional treatment arises without the legislation having to explicitly describe digital tokens as property. By linking rights to factual control of the token, the framework allows tokens to operate in practice like proprietary assets while avoiding the need to formally define them as a new category of property in law. However, nothing prevents a court from doing so in relation to a particular case.

Regulatory Focus on Intermediaries

The principal policy objective of the Bill is not to determine the nature of digital assets as property but to regulate intermediaries operating within digital asset markets. This focus is critical because most risks to consumers and market integrity arise at the level of exchanges and custodians, where digital tokens are held, transferred and managed on behalf of users. Therefore, the reforms specifically target:

• digital asset trading platforms, and
• tokenised custody platforms.

These intermediaries frequently hold digital tokens on behalf of users. Furthermore, recent international exchange failures have highlighted the risks associated with such custodial arrangements. Problems that have emerged include:

• insolvency of exchanges,
• commingling of customers assets,
• withdrawal freezes, and
• hacking or misappropriation of digital tokens.

To address these risks, the Bill proposes bringing digital asset platforms within the scope of Australia’s financial services regulatory regime. This regime, primarily established under the Corporations Act 2001, regulates financial markets and services by requiring licensing, conduct obligations, and consumer protection standards for entities providing financial products or services. In particular, it requires providers to obtain Australian Financial Services (AFS) licences, comply with custody standards, and provide enhanced disclosure and market conduct protections.

Continued Role of Existing Property Law

Although the Bill introduces new regulatory mechanisms, it explicitly states that existing areas of law continue to apply to digital assets, including:

• property law,
• insolvency law,
• consumer protection law,
• criminal law, and
• taxation law.

This means that the classification of digital assets as property remains primarily a matter for courts to determine. This may depend on the circumstances of a case. The Explanatory Memorandum acknowledge that Australian courts have already begun recognising cryptocurrencies such as Bitcoin as forms of property in certain contexts, particularly in asset recovery and insolvency cases. However, the Bill does not attempt to codify this judicial approach into a comprehensive statutory definition.

Problem the Bill Actually Solves

The central regulatory problem addressed by the Bill is custodial risk rather than property classification. Prior to the proposed framework, cryptocurrency exchanges and digital asset platforms could hold large quantities of customer digital assets without being subject to the same regulatory requirements as traditional financial institutions. The Bill seeks to close this gap by:

• bringing digital asset platforms under financial services regulation,
• requiring licensing and compliance obligations,
• establishing custody standards, and
• improving disclosure requirements.

These measures aim to reduce systemic risks and improve consumer protection without requiring a definitive answer to the question of whether digital assets constitute a new category of property. This is beneficial to consumers because it introduces regulatory safeguards such as licensing, custody standards, and disclosure obligations for digital asset platforms. It also provides clearer accountability for intermediaries that hold or manage customers’ digital assets, reducing the likelihood of misuse loss, or mismanagement of digital tokens.

Broader Implications for Property Law

Even though the Bill avoids defining digital assets as property, it implicitly recognises digital tokens as possessable and controllable assets. This is a step in the right direction because it aligns legal regulation with the technological realities of blockchain systems, where control and possession are determined by cryptographic access rather than physical custody. Accordingly, the framework assumes that:

• digital tokens can be possessed through factual control,
• possession can confer practical authority, and
• legal rights may attach to that possession.

This conceptual approach aligns with developments in other jurisdictions, including reforms and legal principles emerging in the United Kingdom, the United States, and international organisations examining digital asset regulation. For example, in the United Kingdom the UK Law Commission has proposed recognising certain digital assets as a new category of personal property (‘data objects’), while in the United States amendments to the Uniform Commercial Code (UCC) Article 12 introduce the concept of ‘controllable electronic records’ based on control rather than physical possession. At the international level, the UNIDROIT Principles on Digital Assets similarly emphasise control of digital assets as the key legal connecting factor for having proprietary rights and their transfer.

Conclusion

The Corporations Amendment (Digital Assets Framework) Bill 2025 does not resolve the fundamental legal question of whether digital assets constitute property under Australian law. Instead, it adopts a pragmatic regulatory approach that focuses on control of digital tokens and regulation of intermediaries. By defining digital tokens in terms of factual control, conceptualising digital assets as bundles of rights, and imposing licensing and custody requirements on digital asset platforms, the Bill addresses key market risks without attempting to create a new category of property.

In practical terms, the proposed legislation reduces regulatory uncertainty surrounding digital asset intermediaries while leaving the deeper classification of digital assets to the courts and existing private law doctrines. The result is a regulatory framework that accommodates technological innovation while preserving flexibility in the ongoing evolution of digital property law. This is beneficial for Australia because it allows the legal system to adapt incrementally to technological change while maintaining regulatory oversight and consumer protection in rapidly developing digital asset markets.

https://open.substack.com/pub/macropsychic/p/australia-corporations-amendment