The Canadian Investment Regulatory Organization (CIRO), the national self-regulatory organization overseeing investment dealers and trading activity in Canada, has finalized new requirements aimed at bolstering investor protection within the burgeoning digital asset sector. These amendments specifically target investment dealers that facilitate crypto asset trading for clients, setting strict standards primarily focused on the custody and safeguarding of digital assets.
Central to the new framework is the mandate for enhanced operational safeguards concerning private key management. CIRO requires dealers to maintain crypto assets through a qualified custodian, ensuring the complete segregation of client assets from the firm’s proprietary holdings. This measure is critical to minimize risks associated with insolvency, hacking, or operational failures. Furthermore, dealers must implement rigorous internal controls, including robust risk assessments and insurance coverage adequate for the unique risks inherent in holding digital assets. The rules also define clear parameters regarding the dealer’s control over the private keys, demanding physical and logical security measures that meet stringent regulatory expectations.
CIRO stated that these new guidelines are a direct response to the volatility and systemic risks highlighted by recent global failures in the crypto market. By setting clear parameters for custody, the organization aims to harmonize the treatment of crypto assets with traditional securities laws, thereby enhancing market integrity and reducing counterparty risk for retail and institutional investors utilizing registered Canadian investment dealers for their digital asset exposure. The implementation of these rules marks a significant step towards formalizing and stabilizing the regulated crypto landscape in Canada.
Source: Canada’s investment watchdog sets new rules for crypto custody
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