TL;DR
- CIRO formalized a custody framework for crypto and tokenized assets, enforced through membership terms while permanent rules remain in development.
- The framework uses a tiered custodian model: Tier 1 and Tier 2 can hold up to 100% of dealer crypto under higher capital and assurance standards.
- Tier caps tighten for others at 75% and 40%, internal custody is limited to 20%, and supervision relies on monitoring and enforcement to adapt.
Canada’s self-regulatory investment dealer body, the Canadian Investment Regulatory Organization (CIRO), has formalized an interim framework for the custody of crypto and tokenized assets, tightening expectations for platforms while permanent rules remain under development. This interim custody program is intended to provide investor protection and operational clarity during a transition period. In a Tuesday notice, CIRO said the framework sets supervisory expectations for investment dealers running crypto trading platforms, covering custody limits, client asset segregation, and reporting obligations, and it applies through binding terms and conditions of membership rather than formal rulebook amendments.
A tiered custody model that hardwires limits and resilience tests
Under the framework, dealer members must hold crypto assets either with CIRO-approved digital asset custodians or through internal custody arrangements that meet baseline standards. The core takeaway is that CIRO is linking custody permissions to measurable resilience, not branding or market share. The regulator introduced a tiered custodian model that ties requirements to the share of client assets a custodian can hold. Tier 1 and Tier 2 custodians may hold up to 100% of a dealer’s crypto, but only with higher capital thresholds, stronger governance, and enhanced assurance, including independent external cybersecurity reviews.
Lower-tier custodians face stricter concentration limits to cap operational and counterparty exposure across dealer platforms and products. The framework’s guardrails effectively force a diversification and quality upgrade across custody supply chains. Tier 3 custodians are permitted to hold up to 75% of a dealer’s crypto assets, and Tier 4 custodians up to 40%. Dealers using internal custody are capped at 20% of client crypto assets. CIRO also set minimum custodian capital requirements that scale by risk and jurisdiction, with higher requirements for foreign companies to reflect cross-border enforcement and insolvency uncertainty.
CIRO said custody supervision will run through monitoring, reporting, and enforcement tied to dealer membership conditions, letting it respond to risks without locking requirements into permanent rules. The operating model is built for agility so controls can be recalibrated as market structure shifts. The interim framework follows earlier risk-based measures, including CIRO’s Feb. 6, 2025 decision to exclude crypto funds from reduced margin eligibility. It lands alongside policy work, including the Bank of Canada’s Dec. 17, 2025 stance that it would only support high-quality fiat-backed stablecoins in its planned framework.
