The Canadian Investment Regulatory Organization (CIRO) has formalized its interim framework governing the custody of crypto and tokenized assets.
The move outlined how dealer members are expected to safeguard client holdings while permanent crypto-specific rules remain under development.
In a Tuesday notice, CIRO said the framework sets out its supervisory expectations for investment dealers operating crypto trading platforms, including custody limits, segregation standards, reporting obligations and tiered requirements for third-party crypto custodians.
The self-regulatory organization said the framework operates through binding terms and conditions of membership, rather than through amendments to its core rulebook. It is intended to provide investor protection and regulatory clarity while broader policy work continues.
“We expect that, over time, elements of this framework may inform the development of permanent rules or harmonized regulatory instruments as crypto asset markets mature,” CIRO added.
Tiered custody model and capital requirements
Under the framework, dealer members must hold crypto assets either with CIRO-approved digital asset custodians or under internal custody arrangements that meet baseline standards.
The regulator introduced a tiered custodian model that links capital, insurance, governance and technology-assurance requirements to the proportion of client assets a custodian is permitted to hold.
Tier 1 and Tier 2 crypto custodians are allowed to hold up to 100% of a dealer’s crypto, subject to higher capital thresholds and enhanced assurance standards, including external cybersecurity reviews.
Lower-tier custodians face stricter caps, with Tier 3 and Tier 4 custodians permitted to hold up to 75% and 40% of a dealer’s crypto assets, respectively. Meanwhile, dealers’ internal custody is limited to 20% of client crypto assets.
CIRO also set minimum capital requirements for custodians that scale by risk and jurisdiction, with higher requirements for foreign companies to account for cross-border enforcement and insolvency uncertainty.
CIRO said custody supervision is being carried out through ongoing monitoring, reporting and enforcement tied to dealer membership conditions, allowing the regulator to respond quickly to emerging risks without locking requirements into permanent rules.
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Canada’s broader crypto policy situation
The framework follows earlier risk-based measures taken by CIRO to address crypto market activities. On Feb. 6, 2025, CIRO excluded crypto funds from reduced margin eligibility, citing volatility, liquidity risks and regulatory uncertainty.
The custody guidance also comes as Canadian authorities continue to work on broader crypto regulations.
On Dec. 17, 2025, the Bank of Canada said it would only support high-quality, fiat-backed stablecoins as part of its planned regulatory framework, highlighting the country’s cautious, phased approach to crypto market oversight.
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