Canada’s top investment industry regulator announced new rules on digital asset custody aimed at preventing future losses arising from hacking, fraud, and inadequate governance.
The Canadian Investment Regulatory Organization’s (CIRO) Digital Asset Custody Framework, published on Tuesday, sets clear expectations for how dealer members operating crypto asset trading platforms (CTPs) must safeguard crypto assets.
CIRO said the framework will be enforced through the terms and conditions of membership as an interim measure, allowing for quicker adaptation to emerging risks while broader, permanent rules are developed.
The self-regulatory industry organization noted that the rules address “technological, operational, and legal risks unique to digital assets,” drawing lessons from past incidents like the 2019 collapse of QuadrigaCX that led thousands of people to lose their life savings.
Tiered structure
As its core feature, the framework introduces a tiered, risk-based structure for crypto custodians, categorizing them into four tiers based on factors such as capital levels, regulatory oversight, insurance coverage, and operational resilience.
The tiers determine the proportion of client assets a custodian can hold — up to 100% for top-tier custodians with the strongest safeguards, and down to 40% for baseline Tier 4. Meanwhile, internal custody by dealer members is capped at 20% of the value of crypto assets they hold for clients.
Additional requirements include robust governance policies covering key management, cybersecurity, incident response, and third-party risks, as well as mandatory insurance, independent audits and security compliance reports, and regular penetration testing. Custody agreements must also clearly establish liability for losses arising from negligence or preventable failures, the framework states.
“The framework reflects a risk-based and proportionate approach designed to balance investor protection with market innovation and competition,” CIRO said. It was developed in consultation with industry stakeholders, including CTPs and custodians, and in consideration of international practices.
This move aims to bolster Canada’s efforts to strengthen investor protections in the country’s evolving crypto market while supporting responsible innovation.
Last October, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) fined local crypto exchange Cryptomus around $126 million for failing to report over 1,000 suspicious transactions linked to darknet markets and wallets involved with fraud, ransomware payments, and sanctions evasion. It also fined offshore exchanges KuCoin and Binance earlier in the year for similar reasons.
CIRO is a self-regulatory body with enforcement authority over its member firms and individual registrants, and is empowered to investigate misconduct and impose disciplinary actions, including fines and suspensions.
© 2026 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Trade Crypto On Coinhub Exchange
Trade Crypto On Coinhub Exchange
Stay ahead of the market by turning news insights into trading opportunities. With Coinhub Exchange, you can seamlessly buy, sell, and manage your digital assets, all in one secure platform. Take advantage of real-time market insights, deep liquidity, and fast execution for your favorite cryptocurrencies. Don’t just read about it — trade crypto now!
Disclaimer
The content of this article shown by Coinhub News, powered by The Block, is for informational purposes only and should not be construed as financial, legal, tax, or investment advice. Coinhub News and its affiliates are not a licensed financial advisor, legal advisor, broker, or tax advisor, and ... should not be considered as professional advice or a recommendation to engage in any specific investment, legal decision, or financial transaction. Cryptocurrency markets are highly speculative and volatile. Readers should perform their own independent research and consult with a qualified professional before making any financial or legal decisions. The opinions expressed in this article are those of the author and do not necessarily represent the views or opinions of the Company of its affiliates. Additionally, the Company does not make any representations or warranties regarding the accuracy, timeliness, reliability, or completeness of any information in this article. By accessing this content, you acknowledge that any reliance on the information contained in this article is solely at your own risk. The Company is not responsible for any financial losses, legal disputes, or other damages that may arise from reliance on this content or from any investment or legal decisions based on the information provided. Investing in cryptocurrencies involves substantial risks, including the risk of losing your entire investment, and you should carefully consider whether it is appropriate for your circumstances.
Read more
