Canada sets a custody playbook for crypto trading platforms and dealers
The Canadian self-regulatory body for investment dealers released a Digital Asset Custody Framework that spells out how crypto and tokenized assets must be held and segregated on registered crypto trading platforms. The guidance is effective immediately and uses a tiered approach for custodians, reporting, and internal controls.
Custody is where crypto platforms break or earn trust. If keys are mishandled, or reserves sit in the wrong place, clients can lose access fast and courts may have limited clarity during an insolvency.
On Feb. 3, the Canadian Investment Regulatory Organization (CIRO) published a Digital Asset Custody Framework for dealer members that operate crypto-asset trading platforms in Canada. The guidance is effective immediately and will be enforced through terms and conditions of membership.
CIRO said it chose this path because existing custody rules were written for securities and derivatives. Digital assets add new failure modes: private keys can be lost or stolen, cyber risk is higher, and custody often depends on a small set of specialized service providers. The framework is described as an interim approach that can inform permanent rules later.
The framework gives firms two broad custody options. They can hold client digital assets with one or more CIRO-approved digital asset custodians, or use an internal custody setup that meets CIRO’s technology and controls expectations. CIRO also draws a hard line between crypto assets and tokenized financial assets. Tokenized versions of familiar instruments still need the protections that come with traditional custody locations, plus added safeguards for the digital plumbing.
Day-to-day operations get more explicit, too. CIRO expects daily segregation calculations and quick fixes when there is a shortfall. It also asks firms to limit commingling of client and firm assets and to document why any commingling is operationally necessary. Firms must monitor custody limits at least weekly and report holdings, custody locations, and any limit breaches to CIRO in the format and frequency it specifies.
For Canadian platforms that already operate as registered dealers, the work now is practical: tighten custody agreements, collect evidence on controls, map key management, and prove redemptions and segregation can hold up during stress.
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