CIRO Establishes Interim Framework for Crypto Custody in Canada

Introduction of CIRO's Interim Crypto Custody Framework

The Canadian Investment Regulatory Organization (CIRO) has introduced an interim framework to regulate the custody of cryptocurrencies and tokenized assets in Canada. This initiative aims to ensure dealer members safeguard client holdings effectively as the development of comprehensive crypto-specific regulations continues.

Framework Details and Supervisory Expectations

According to a recent CIRO announcement, the framework outlines supervisory expectations for investment dealers that manage crypto trading platforms. Key components include custody limits, segregation standards, reporting obligations, and tiered requirements for third-party crypto custodians.

This framework operates through binding membership terms and conditions, offering investor protection and regulatory clarity without altering CIRO's core rulebook. "We anticipate that elements of this framework may eventually inform the creation of permanent regulations as the crypto asset market evolves," stated CIRO.

Tiered Custody Model and Capital Requirements

Under the framework, dealer members must store crypto assets with CIRO-approved digital asset custodians or maintain internal custody arrangements meeting baseline standards. CIRO's tiered custodian model links capital, insurance, governance, and technology-assurance requirements to the proportion of client assets a custodian can hold.

Tier 1 and Tier 2 custodians can manage up to 100% of a dealer's crypto assets, subject to higher capital thresholds and enhanced assurance standards, including external cybersecurity reviews. Lower-tier custodians face stricter limits, with Tier 3 and Tier 4 custodians allowed to hold up to 75% and 40% of a dealer's assets, respectively. Dealers are restricted to holding 20% of client crypto assets internally.

CIRO has also established minimum capital requirements for custodians, which vary based on risk and jurisdiction, with higher requirements for foreign entities to address cross-border enforcement and insolvency challenges.

Ongoing Monitoring and Broader Crypto Policy

CIRO is conducting custody supervision through continuous monitoring, reporting, and enforcement, aligning with dealer membership conditions. This approach allows for rapid responses to emerging risks without embedding requirements into permanent regulations.

Previously, CIRO implemented risk-based measures to address crypto market activities, excluding crypto funds from reduced margin eligibility on Feb. 6, 2025, due to volatility and liquidity risks. As Canadian authorities work on broader crypto regulations, the Bank of Canada announced on Dec. 17, 2025, that it would support only high-quality, fiat-backed stablecoins as part of its regulatory framework.