Canada’s investment watchdog sets new rules for crypto custody
CIRO introduced a new framework setting risk-based rules for how dealer members must safeguard client crypto assets.Summary
The Canadian Investment Regulatory Organization (CIRO) has announced the Digital Asset Custody Framework to establish clear expectations for dealer members operating crypto asset trading platforms (CTPs) regarding the safeguarding of digital assets, aiming to prevent losses from hacking or fraud. This framework is being implemented as an interim measure via membership terms and conditions while permanent rules are developed, drawing lessons from past failures like the QuadrigaCX collapse. The core feature is a four-tiered, risk-based structure for custodians, which dictates the percentage of client assets they can hold, ranging from 40% to 100% based on factors like capital and resilience. Internal custody is capped at 20%. The rules mandate robust governance, cybersecurity, incident response, mandatory insurance, independent audits, and clear liability in custody agreements. CIRO stated the approach balances investor protection with innovation, following consultations with industry stakeholders and considering international practices.
(Source：The Block)