Canada Tightens Crypto Custody Rules to Crack Down on Investor Losses

The Canadian Investment Regulatory Organization (CIRO) released a new Digital Asset Custody Framework on February 3, 2026, imposing tougher standards on how crypto trading platforms and custodians safeguard client assets. The interim guidance targets Dealer Members running Crypto-Asset Trading Platforms (CTPs), aiming to mitigate risks from hacks, fraud, operational failures, and insolvencies that have caused significant investor losses in the past, including the high-profile 2019 QuadrigaCX collapse.

The framework adopts a tiered, risk-based approach to custody, classifying custodians by security protocols, capital strength, insurance coverage, regular audits, and resilience. Top-tier qualified custodians (often third-party) can hold higher percentages of client assets (up to 100% in some cases), while lower tiers face caps (e.g., down to 40%). It mandates clear segregation of client crypto from firm funds, prohibits improper use or pledging, requires robust governance, incident response plans, and enhanced transparency/reporting on storage practices.

CIRO emphasized that existing rules for traditional securities custody remain unchanged, as digital assets pose unique technological, legal, and operational challenges. The measures build on prior expectations and will be imposed through membership terms, allowing proportionate flexibility to support innovation while prioritizing protection.

Regulators hope the rules will reduce exposure to failures, restore confidence, and legitimize Canada’s regulated crypto sector amid global trends toward stronger asset safeguards. Industry participants recognize potential compliance cost increases but see benefits in clearer standards that could draw more institutional participation.

The framework aligns with ongoing Canadian Securities Administrators (CSA) initiatives, such as tokenization projects, and may evolve into permanent rules. Platforms must comply promptly or risk restrictions/enforcement. CIRO will monitor and adjust as needed, underscoring Canada’s balanced push for a secure, innovative digital asset ecosystem. Updates will follow as implementation progresses.