Regulation of Payment Service Providers – Tranche 1 draft legislation
Market Insights
Introduction
Since June 2023, the government has been consulting on a proposed licensing framework for payment service providers (PSPs).
Following the government’s release in October 2025 of Tranche 1A of the draft legislation which covers concepts underlying the new framework and licensing obligations, the government has now released Tranche 1 which updates and expands on Tranche 1A including definitions and core concepts and disclosure requirements for tokenised SVFs. Tranche 1 also includes proposed safeguarding requirements, licensing exemptions and exclusions (supported by draft regulations), APRA powers for major SVF providers and designated payment service providers, unclaimed monies rules, a power to make the ePayments Code mandatory and transitional arrangements.
Tranche 2 will follow later in 2026 and is expected to cover common access requirements and an industry standard setting body.
Tranche 1 includes exposure drafts of:
- Treasury Laws Amendment Bill 2026: Payments System Modernisation — amendment of the Corporations Act 2001 and other Acts
- Payment Entities (Prudential Regulation) Bill 2026
- supporting explanatory materials and draft regulations
- Fact Sheet
Together, these documents reshape licensing obligations and outline APRA’s new role for major SVC providers.
Below, we have set out the key changes at a glance. Our full overview of the draft legislation is also available for download. Click here.
| New Licensing Framework |
|
| New Core Concepts | The reforms introduce several new legal definitions, including:
These definitions determine which businesses fall under the new licensing and regulatory rules. |
| Safeguarding Customer Money | Stricter rules require payment system licensees to:
|
| Updated Exemptions | Existing exemptions are retained and modernised, including:
|
| Unclaimed Money Rules | New concepts define when stored value becomes unclaimed (after 7 years of inactivity). Major SVF providers will have new obligations to report and remit unclaimed amounts to ASIC. |
| ePayments Code becomes Mandatory | Treasury gains the power to make a mandatory ePayments Code for specified sectors. |
| Transitional Arrangements | Depending on your current licensing status:
|
| APRA's Expanded Role | APRA will regulate major SVF providers (those holding more than $200M in stored value) and designated payment entities where systemic stability risks exist. APRA will set prudential standards, require registration, and have new information gathering and enforcement powers. |
The Tranche 1 reforms significantly expand the scope of payments regulation. Many providers who were previously unlicensed – or lightly regulated – will now require formal authorisations.
If your business issues, processes, stores, facilitates or enables payments (including through digital wallets, platforms, APIs, or value‑holding mechanisms), these changes are likely to affect you.
Next Steps
We recommend:
- reviewing whether your business will require an AFSL or a licence variation,
- considering operational impacts of new safeguarding and disclosure rules, and
- lodging a submission before the consultation closes on 9 April 2026.
We are available to help you assess your position, manage the transition process, and prepare your submission. Please contact a member of our team for further information on how we can assist.
This article was written by Andrew Galvin, Partner.
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