CIRO has introduced a tiered custody framework for investment dealers operating Canadian crypto-asset trading platforms. The framework covers crypto assets and tokenized assets, including stablecoins, and is applied through terms and conditions of membership rather than a permanent chapter of the CIRO rules.[1][2]
The model links the percentage of customer crypto assets that can be placed with a custodian to that custodian’s capital, regulatory status, technology assurance, insurance, resilience and legal protections. It is designed to avoid both unlimited concentration at a weak provider and an inflexible single standard that excludes capable custodians.[1]
Four tiers produce different concentration limits
Custodian tiers and maximum dealer exposure
| Tier | Maximum share of dealer crypto assets | Capital baseline |
|---|---|---|
| Tier 1 | 100% | C$100m Canadian / C$150m foreignSource 1 |
| Tier 2 | 100% | C$10m Canadian / C$100m foreignSource 1 |
| Tier 3 | 75% | C$10m Canadian / C$100m foreignSource 1 |
| Tier 4 | 40% | C$10m Canadian / C$100m foreignSource 1 |
The percentage is a ceiling on the dealer’s custody allocation, measured alongside the custodian’s capital and control requirements. Tier 2 reaches the same 100% capacity as Tier 1 with a lower capital baseline but additional assurance requirements. The dealer’s concentration, contractual rights and ability to recover assets remain part of the custody assessment.[1]
Tokenized traditional assets retain a dual custody test
Asset classification and custody consequence
| Asset form | CIRO treatment | Reason |
|---|---|---|
| Crypto asset | Held with an approved crypto custodian or under qualifying internal custody, subject to limits. | Private keys, irreversible transfers and unsettled insolvency treatment create distinct risks.Source 1 |
| Tokenized traditional financial asset | Custodian must qualify as an acceptable securities location and meet specified digital-custody safeguards. | The token should not be used to bypass traditional ownership and custody protections.Source 1 |
| Traditional non-tokenized security | Existing securities custody rules continue. | The framework does not replace the mature legal and settlement system for conventional securities.Source 1 |
Technology assurance scales with the amount a custodian may hold
Selected control requirements
| Measure | Value | Context |
|---|---|---|
| Baseline assurance | Security and Availability | All acceptable crypto custodians need SOC 2 or ISAE 3000 Type 2 assurance covering these criteria.Source 1 |
| Higher-tier assurance | Confidentiality and Processing Integrity | Tier 1 and Tier 2 custodians face additional assurance expectations.Source 1 |
| Crypto-specific controls | Key lifecycle, wallets, signing and incident recovery | Tier 2 needs crypto-specific assurance. Tier 3 proprietary technology must meet that test; outsourced technology needs annual provider assurance and user-entity controls.Source 1 |
| Penetration testing | At least annually for Tiers 2–4 | Tier 1 is excepted from this specific requirement because of its separate highest-tier regulatory and capital structure.Source 1 |
| Insurance | Fidelity coverage; specified cold-storage alternatives for lower tiers | Coverage complements rather than replaces operational and legal safeguards.Source 1 |
Foreign custody adds jurisdiction and enforceability questions
The framework expects all acceptable crypto custodians to be established in a Basel Accord jurisdiction and regulated as a bank or trust company, with evidence from the home regulator. It also expects legal and functional separation from an exchange or marketplace business. Those conditions aim to reduce conflicts, rehypothecation risk and uncertainty over who controls client assets.[1]
Internal custody has a separate capacity and control test
A dealer may self-custody up to 20% of the crypto assets held for clients and its own account, excluding proprietary positions provided for in Risk Adjusted Capital. Its internal solution must meet the Tier 4 assurance and technology requirements. Approved self-custody of tokenized traditional assets has no separate crypto-style percentage limit, provided the dealer qualifies as an Approved Tokenized Asset Custody Location.[1]
CIRO expects daily segregation calculations and custody-limit monitoring at least weekly, with prompt remediation. Valuation changes can alter the percentage held at a location even without a new transfer, making limit monitoring an ongoing control rather than only an onboarding calculation.[1]
Recovery also depends on the legal effect of segregation in insolvency, wallet access and authorisation, and the actual insurance policy’s covered events, storage methods, exclusions and limits. A high tier establishes eligibility under the framework; those legal and operating arrangements determine how customer property is protected through a failure.[1]
CIRO describes the framework as interim and expects it to evolve as Canadian securities regulators progress wider tokenization work and as permanent rules are developed. A platform’s current membership terms therefore remain the operative source for its actual custody arrangement.[1]
Sources & further reading
- Notice on CIRO’s Digital Asset Custody Framework Canadian Investment Regulatory Organization · 3 Feb 2026 · Accessed 16 Oct 2026
- CIRO issues guidance on digital asset custody for crypto-asset trading platforms Canadian Investment Regulatory Organization · 3 Feb 2026 · Accessed 16 Oct 2026