CIRO introduces temporary custody regulations for cryptocurrencies to protect client funds and enhance investor security in Canada.
The Canadian Investment Regulatory Organization (CIRO) has rolled out temporary custody regulations for cryptocurrencies and tokenized assets, aiming to safeguard client funds while more permanent legislation is developed.
These new standards will be enforced as part of CIRO's membership requirements, rather than as formal amendments to the existing rulebook. This approach is intended to enhance investor protection and clarify the regulatory landscape as discussions on a global regulatory framework continue.
CIRO has established a tiered system for custodians based on the proportion of client assets they are permitted to hold, which includes:
- Levels 1 and 2: These custodians can manage up to 100% of a dealer's cryptocurrency, facing stricter capital and cybersecurity audit requirements.
- Level 3: This tier can hold a maximum of 75% of assets.
- Level 4: The limit is set at 40%.
Additionally, dealers are restricted to holding a maximum of 20% of client funds independently. For foreign entities, capital requirements are elevated due to the complexities of cross-border regulations and potential bankruptcy risks.
CIRO intends to maintain oversight through ongoing compliance monitoring, allowing for quick responses to emerging risks without the delays associated with long-term rule changes.
Notably, Canadian firms launched the first spot Solana ETFs globally in April 2025, marking a significant milestone in the cryptocurrency investment landscape.
