CIRO issues new digital-asset custody framework for Canadian crypto trading platforms

The Canadian Investment Regulatory Organization unveiled a new custody framework that defines how Dealer Members running crypto-asset trading platforms must protect client digital holdings. Developed with industry input and shaped by regulatory trends abroad, the guidance confronts technology, governance and legal exposures tied to crypto and tokenized instruments, including dollar-pegged tokens. CIRO will bind these expectations to membership terms and conditions, creating a direct compliance channel for its regulated participants. The framework raises standards for the custody and segregation of client assets whether those assets are housed internally or held by third-party custodians. It uses a tiered, risk-sensitive architecture designed to let firms diversify custody arrangements while upholding consistent investor safeguards. That design seeks to preserve operational flexibility for innovation without recreating single points of failure that have driven large losses in previous crypto incidents. Elevating custody and segregation among its 2026 priorities signals a move toward proactive supervision rather than ad hoc fixes after breaches occur. Practically, trading platforms will need to revisit contracts with custodians, shore up governance, and strengthen technical controls and incident response plans. For investors, the framework clarifies accountability lines and promises faster regulatory leverage to address misconduct or operational breakdowns—though outcomes will hinge on enforcement and industry adherence. Because the guidance is effective immediately, firms face near-term implementation pressure and should expect more detailed supervisory scrutiny. If CIRO follows through with testing and enforcement, the rule set could materially reduce custody-related contagion risk in Canada’s crypto market. Overall, the framework reduces regulatory ambiguity and aims to balance market development with concrete protections for asset holders.