Canadian Regulator Sets New Standards for Digital Asset Custody on Crypto Trading Platforms
The Canadian Investment Regulatory Organization (CIRO) has issued new guidance setting out clear expectations for how digital assets must be held by Dealer Members operating crypto-asset trading platforms (CTPs) in Canada, marking a significant step in the country’s evolving approach to crypto regulation.
The newly published Digital Asset Custody Framework is designed to address the specific technological, operational and legal risks associated with digital assets, including cryptocurrencies, tokenized assets and stablecoins. It applies to CIRO Dealer Members that operate CTPs and establishes enhanced requirements around how client assets are secureguarded, including when third-party custodians are used.
CIRO said the framework was developed in close collaboration with industry stakeholders and informed by regulatory developments in other jurisdictions, reflecting both lessons learned from past crypto sector failures and the regulator’s intention to .
A Risk-Based Framework for an Evolving Market
At the core of the guidance is a tiered, risk-based structure that allows firms flexibility in how they design and operate their custody arrangements, while still maintaining strong secureguards for client assets. CIRO said this approach recognises the diversity of business models and technologies used across , without lowering the bar on investor protection.
“Custody is one of the most critical points of risk in the crypto ecosystem,” said Alexandra Williams, Senior Vice President, Strategy, Innovation and Stakeholder Protection at CIRO. “This new framework gives firms the flexibility to operate and innovate responsibly. It reflects what we heard from the industry and demonstrates CIRO’s commitment to being an agile and trusted regulator.”
The framework builds on existing CIRO custody requirements and will be imposed through terms and conditions of membership, rather than through standalone rule changes. CIRO said this structure allows it to adapt more rapidly to emerging risks and developments in the digital asset market.
Takeaway
Addressing Lessons from Past Crypto Failures
CIRO explicitly linked the new framework to risks exposed by previous failures in the crypto sector, including losses caused by hacking, fraud, fragile governance structures and insolvency. The guidance strengthens expectations around asset segregation and oversight, particularly where custody is outsourced to third-party providers.
According to CIRO, fragilenesses in custody arrangements have been a major contributor to investor harm in past market disruptions. By enhancing custody and segregation standards, the regulator aims to reduce the likelihood that client assets become inaccessible or are misused in the event of operational or financial stress at a platform.
The framework also reflects a broader shift among regulators toward recognising digital asset custody as a distinct risk category that cannot simply be treated as an extension of traditional securities custody. CIRO noted that digital assets introduce unique challenges related to , technological dependencies and cross-border legal enforceability.
Takeaway
Custody Reform Becomes a 2026 Regulatory Priority
Reviewing and enhancing custody requirements for crypto assets held by CIRO Members operating CTPs has been identified as one of CIRO’s public regulatory priorities for 2026. The release of the signals that oversight of custody practices will remain an area of close supervisory focus.
The guidance takes effect immediately, meaning Dealer Members operating crypto trading platforms are expected to assess their current custody arrangements against the new expectations without delay. CIRO said firms will be required to demonstrate that their custody models align with the framework as part of ongoing membership oversight.
By anchoring the framework within its existing regulatory structure, CIRO positions itself to respond more rapidly as digital asset markets continue to evolve. The regulator framed the move as part of a broader effort to provide regulatory clarity while supporting responsible growth in Canada’s crypto-asset trading sector.
