The Canadian Investment Regulatory Organization (CIRO) has formalized its interim framework for the custody of crypto and tokenized assets.
The move outlined how merchant members could be expected to guard customer holdings while everlasting crypto-specific rules are still under development.
In an announcement on Tuesday, CIRO said the framework sets out its regulatory expectations for investment dealers operating crypto trading platforms, including custody limits, segregation standards, reporting requirements and tiered requirements for third-party cryptocurrency custodians.
The self-regulatory organization said the framework operates on mandatory terms and conditions of membership relatively than changes to its core rulebook. It goals to offer investor protection and regulatory clarity while wider policy work continues.
“We expect that elements of this framework will inform the event of everlasting rules or harmonized regulatory tools over time as crypto asset markets mature,” CIRO added.
Tiered custody model and capital requirements
Under the framework, merchant members must hold crypto assets either with CIRO-approved digital asset custodians or under internal custody arrangements that comply with core standards.
The regulator has introduced a tiered custodian model that links capital, insurance, governance and technology security requirements to the proportion of client assets a custodian is allowed to carry.
Tier 1 and Tier 2 crypto custodians are allowed to carry as much as 100% of a trader's crypto, subject to higher capital thresholds and enhanced security standards, including external cybersecurity reviews.
Lower tier custodians are subject to stricter caps, with tier 3 and 4 custodians allowed to carry as much as 75% and 40% of a trader's crypto assets, respectively. Meanwhile, merchants’ internal custody is proscribed to twenty% of consumers’ crypto assets.
CIRO also sets minimum capital requirements for custodians that scale depending on risk and jurisdiction, with higher requirements for foreign entities to account for cross-border enforcement and insolvency uncertainties.
Custodian bank capital requirements. Source: CIRO
According to CIRO, custody oversight occurs through ongoing monitoring, reporting and enforcement tied to the terms of dealer membership, allowing the regulator to reply quickly to emerging risks without shoehorning requirements into everlasting rules.
Canada's overall crypto policy situation
The framework follows previous risk-based measures CIRO has taken to handle crypto market activity. On February 6, 2025, CIRO excluded crypto funds from the reduced margin eligibility, citing volatility, liquidity risks and regulatory uncertainty.
The custody guidelines also come as Canadian authorities proceed to work on more comprehensive crypto regulations.
On December 17, 2025, the Bank of Canada stated that it could only support high-quality, fiat-backed stablecoins as a part of its planned regulatory framework, underscoring the country's cautious, phased approach to crypto market oversight.
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