Canada tightens digital asset custody rules after QuadrigaCX collapse

Canada’s investment industry regulator, the Canadian Investment Regulatory Organization (CIRO), has introduced a new Digital Asset Custody Framework aimed at strengthening standards for how crypto assets are safeguarded, citing past failures such as the collapse of QuadrigaCX.

The new guidance sets out a tiered, risk-based custody structure designed to let firms continue innovating while improving investor protection against threats such as hacking, fraud, weak governance and insolvency. CIRO said many of the expectations were developed in close consultation with crypto trading platforms and custodians, and already reflect practices in place across parts of the industry.

CIRO also pledged to proactively update the framework as new custody and cybersecurity risks emerge, rather than waiting for major failures to occur. Repeated supervisory issues across firms or shifts in market practices will be treated as early warning signs that regulatory expectations need to evolve.

The 2019 collapse of QuadrigaCX, which left roughly $123 million in customer assets unaccounted for, remains one of the most notorious crypto failures in Canada. The regulator emphasized that custody represents one of the most critical points of risk in the digital asset ecosystem, warranting stricter oversight to reduce the chance of investor losses.

Canada has maintained a cautious stance on crypto oversight, bringing trading platforms under existing securities rules and emphasizing investor protection through registration, custody and disclosure requirements. Recent federal initiatives on stablecoins and an expanded oversight role for the Bank of Canada suggest the country is gradually moving toward a broader national framework for digital assets.

CIRO operates as a self-regulatory organization overseeing investment dealers, mutual fund dealers and trading activity in Canada, with quasi-judicial authority to investigate misconduct and impose disciplinary actions, including fines, suspensions and permanent bans.