Canada’s financial regulators have strengthened safekeeping and custody requirements for cryptocurrency service providers, marking a new phase of oversight aimed at protecting investors and reducing systemic risk in digital asset markets.
Regulators cited gaps in how customer crypto is held and protected when it is entrusted to trading platforms or financial institutions.
Crypto assets are purely digital assets that use distributed ledger technology and cryptography to record ownership and verify transactions. They can be highly volatile and carry risk of loss.
Stricter Custody Rules for Platforms
The Canadian Securities Administrators (CSA) and related provincial regulators now expect digital asset trading platforms that hold customer crypto to operate under clear custody standards with qualified custodians and segregated accounts.
Under these practices, platforms must store client assets separate from their own operating funds.
Regulators say this lowers the risk that investor funds could be lost in the event of insolvency or mismanagement.
Security and Audit Expectations Raised
The updated guidance also includes minimum security controls. Platforms must use cold storage (offline wallets) for most client funds and maintain detailed records of wallet balances and transactions.
Regulators require independent third-party audits to verify asset holdings.
Canadian regulators also expect crypto firms to carry insurance or dedicated reserve funds to protect against internal fraud, cyberattacks or custodian failures.
Investment Fund Rules Updated
In April 2025, the CSA published amendments to National Instrument 81-102 that set criteria for how public investment funds may hold or invest in crypto assets.
This included new requirements for custody of crypto held on behalf of funds. “Canadian securities regulators are committed to enhancing investor protections,” said Stan Magidson, CSA Chair.
The rules aim to give fund managers clarity on permissible crypto holdings and prevent operational or custody failures from harming investors.
Banking Oversight Includes Crypto Custody Risks
Canada’s federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), updated its 2025 Crypto-Asset Guideline to treat crypto exposures, including custodial services, in banks’ capital and liquidity frameworks.
Banks and federally regulated trust companies must recognize crypto-related custody activities in their risk models.
This marks a shift toward integrating digital asset risk into traditional banking prudential standards.
Industry and Investor Impact
Industry advocates say the clearer custody standards may help attract institutional capital by reducing uncertainty over asset protection.
Analysts note that well-defined safeguards could expand products like tokenized securities and crypto-backed funds.
Retail investors and fund managers are likely to face higher due-diligence expectations, including understanding how platforms hold and secure digital assets.
Regulators emphasize that registration and compliance do not eliminate all risk, reminding users to evaluate platforms before investing.
