- Canada unveils new crypto custody rules to protect investor assets.
- New regulations set custodial limits, boosting crypto market security.
- Canada to regulate stablecoins, ensuring safer digital asset ecosystem.
Canada’s investment regulator, the Canadian Investment Regulatory Organization (CIRO), has unveiled new rules aimed at improving protections for investors in the digital asset space. The Digital Asset Custody Framework, introduced this week, seeks to address the growing concerns around hacking, fraud, and poor governance in the crypto market, particularly following the notorious 2019 QuadrigaCX collapse, which left thousands of investors stranded without their funds.
As part of the framework, CIRO has implemented a tiered, risk-based structure for crypto custodians. This system categorizes custodians into four tiers based on their capital, regulatory oversight, insurance coverage, and operational strength.
These tiers set specific limits on how much of a client’s assets custodians can manage, with top-tier custodians authorized to handle up to 100% of client assets, while the most basic Tier 4 custodians can only manage up to 40%. Additionally, dealers managing crypto assets internally will face a cap of 20%.
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A Comprehensive Governance and Security Approach to Protect Crypto Assets
The new framework goes beyond setting custodial limits by requiring custodians to adopt rigorous governance measures. These measures include cybersecurity protocols, detailed incident response plans, and mechanisms to assess third-party risks.
To ensure ongoing security, custodians must undergo independent audits, submit security compliance reports, and conduct regular penetration testing to identify vulnerabilities. Custody agreements must also specify the responsibilities and liabilities of custodians in the event of negligence or asset security breaches.
By implementing these rules, CIRO aims to protect investors from the significant risks present in the crypto space, while still promoting innovation. The framework was developed with input from industry stakeholders and aligns with international best practices. These efforts are in response to growing concerns over the security of digital assets and are intended to foster both security and innovation in Canada’s expanding crypto market.
Canada to Regulate Stablecoins in 2025 Federal Budget
In addition to the new custodial regulations, Canada is also taking steps to regulate fiat-pegged stablecoins as part of its 2025 federal budget, as previously reported by 36Crypto. The government plans to introduce legislation that will require stablecoin issuers to maintain adequate reserves and establish clear redemption policies. This framework will also enforce stronger risk management systems and stricter data protection measures to build trust and enhance accountability within the digital asset ecosystem.
The forthcoming legislation will further ensure the stability of Canada’s financial system, preserving the integrity of the country’s digital payment landscape while supporting innovation. This regulatory push signals Canada’s commitment to balancing secure, responsible financial innovation with the need for robust investor protection in an evolving crypto world.
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