Canada’s main investment watchdog has moved quickly to clamp down on how crypto is stored on trading platforms — and the changes take effect immediately. This week the Canadian Investment Regulatory Organization (CIRO) published an interim Digital Asset Custody Framework that sets strict, tiered limits and compliance checks on who can hold client crypto and how much they may hold. The goal: reduce single-point-of-failure risk after several high-profile Canadian crypto collapses left investors exposed. What CIRO announced - Custodians will be classed into four tiers based on capital, insurance and operational safeguards. - Tier 1 and Tier 2 custodians that meet higher standards may hold up to 100% of a Dealer Member’s client crypto. - Tier 3 custodians face a lower ceiling (CIRO did not specify the exact cap in its notice). - Tier 4 custodians are capped at 40% of client assets. - Dealer Members that self-custody are limited to holding 20% of client assets and only under strict conditions. New operational and governance demands CIRO’s guidance also tightens requirements around governance, cyber security, insurance, third‑party risk assessments and audit oversight. Custody agreements must clearly assign responsibility if assets are lost or stolen. CIRO says these measures are interim but binding and are being applied through membership conditions so firms must comply right away while a fuller regulatory framework is developed. What this means for platforms and custodians - Smaller platforms that used cheaper or lightly regulated custody arrangements face a choice: upgrade to higher‑tier custodians or sharply reduce in‑house holdings. Both options carry costs. - Larger custodians may see consolidation as platforms look to move assets to firms that meet higher tiers. - CIRO will review compliance documentation and proof of insurance, increasing active regulatory oversight. - Overall, the limits are designed to prevent a single weak custodian from holding a large share of client crypto across multiple platforms. Next steps CIRO is enforcing the interim rules immediately and will ask trading platforms for documents and evidence of adherence in short order. Firms operating crypto-asset trading platforms should prepare for rapid inquiries as regulators build the longer-term rulebook. Image credit: Unsplash; chart: TradingView. Read more AI-generated news on: undefined/news