📢Canada🇨🇦 tightens Crypto Custody Standards to Mitigate Risks from Hacks, Fraud, and Governance Failures

📢Canada🇨🇦 tightens Crypto Custody Standards to Mitigate Risks from Hacks, Fraud, and Governance Failures

Custodians are now subject to a tiered regulatory framework imposing differentiated restrictions based on capitalization, supervisory controls, and operational resilience.

➡️ Under the new structure, top-tier custodians may hold up to 100% of their clients’ crypto assets. Lower-tier providers, however, are subject to progressively stricter concentration limits; Level 4 custodians are capped at 40%. Dealer network participants opting for in-house custody are limited to retaining no more than 20% of the total value of client crypto holdings.

➡️ In designing the framework, the Canadian Investment Regulatory Organization (CIRO) referenced the 2019 QuadrigaCX collapse, a landmark case in which thousands of users were unable to recover their funds, highlighting structural vulnerabilities in crypto custody oversight.

➡️ The requirements apply to dealer members of CIRO, which operates as Canada’s recognized self-regulatory organization for investment dealers. The standards are detailed in the document titled “Digital Asset Custody Framework”. While introduced as a temporary supervisory measure, the rules will remain embedded in membership conditions for crypto trading platforms until permanent legislation is enacted.

➡️ Core focus areas include comprehensive risk assessment, mandatory insurance coverage, and strengthened operational resilience standards.

➡️ The operational framework establishes enhanced requirements for private key segregation and control, cybersecurity protocols, structured incident response mechanisms, and robust third-party risk governance.

➡️ The Bank of Canada is expected to allocate approximately USD 10 million during the 2026–2027 fiscal years to support and oversee the implementation of this enhanced regulatory program.

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