The Canadian Investment Regulatory Organization (CIRO) has introduced temporary standards for the custody of cryptocurrencies and tokenized assets. This document outlines the obligations of dealers to protect client funds until permanent legislation is enacted.
The new regulations are implemented through mandatory CIRO membership conditions, rather than amendments to the main rulebook. The regulator aims to ensure investor protection and clarity in regulations while work continues on a global regulatory framework.
The organization has established a multi-tiered model for custodians. Capital, insurance, and technology audit requirements vary based on the percentage of client assets that the organization is allowed to hold:
- Levels 1 and 2: can hold up to 100% of the dealer's cryptocurrency. They face heightened capital and external cybersecurity audit requirements;
- Level 3: allowed to hold up to 75% of assets;
- Level 4: limit is set at 40%.
Dealers can independently hold no more than 20% of client funds.
For foreign companies, capital requirements are higher due to the risks associated with cross-border regulation and bankruptcy issues.
CIRO plans to monitor compliance through ongoing oversight and reporting. This will enable the regulator to respond swiftly to new risks without the need for long-term rule approvals.
As a reminder, in April 2025, Canadian companies introduced the world's first spot Solana ETFs to the market.