For certain jurisdictions of Canada, including Ontario, the application of investment limits for retail clients on crypto asset trading platforms (“CTPs”) remains a departure from the often-espoused messaging by regulators in taking a product-agnostic, technology-neutral, approach to securities regulation. Generally, it is not the role, nor within the scope of authority, for securities regulators to approve or disapprove of the merits of securities being offered to investors. This reasoning should similarly apply to crypto rights contracts.
This article examines the existing application of investment limits to CTPs and why this approach is ill-fitted to fostering innovation and economic development in the Canadian capital markets. This is particularly true as:
- CTPs are already subject to a robust regulatory regime that adequately addresses investor protection concerns;
- investment limits are mostly unique to the CTP regulatory framework and have not been applied to other registered firms under securities legislation;
- the rationale or process for designating the handful of crypto assets (e.g., bitcoin, ether, litecoin and bitcoin cash) that are not subject to any investment limits (specified crypto assets, or “SCA”) does not appear to be actively monitored and/or updated; and
- global trends and regulatory developments have been focused on reducing regulatory barriers for CTPs.
As an increasing number of CTPs transition to becoming “full-fledged” investment dealers and members of the Canadian Investment Regulatory Organization (“CIRO”),[1] the markets are long overdue for a “hard-fork” on investment limits.
A. Primer on Investment Limits & “Specified Crypto Assets”
Except for a client in Alberta, British Columbia, Manitoba and Quebec,[2] a CTP in Canada is required to place investment limits on crypto assets that have not otherwise been designated to be an SCA. The crypto assets that have currently been designated as SCAs are: bitcoin, ether, bitcoin cash, and litecoin. Absent a very recent update to potentially include certain stablecoin arrangements, the list of SCAs has largely remained unchanged for CTPs in the past four years.
Suitability model
For a CTP that is operating under the suitability model, a client that meets the definition of an “eligible crypto investor” will be limited to purchasing up to $100,000 of non-SCAs. For a client that meets the definition of an “accredited crypto investor”, no investment limits apply for purchases of non-SCAs. The definition of an “accredited crypto investor” closely mirrors that of an accredited investor[3] and is limited to primarily high net-worth individuals.
Suitability-exempt model
For a CTP that is operating under the suitability-exempt model, a client is limited to purchasing a maximum amount of $30,000 of non-SCAs in the preceding 12 months period.
B. The Rationale for Removing Investment Limits
CTPs operating in Canada are already subject to a comprehensive regulatory framework that adequately addresses many investor-protection concerns. This includes:
I. CTPs are already subject to a robust regulatory regime
- Account Appropriateness Assessment – CTPs that received an exemption from the suitability requirement must gather know-your-client (KYC) information about their clients and determine that trading crypto assets is “appropriate” for a client before onboarding these clients.
- Custody – At least 80% of client crypto assets must be held in cold storage with a “qualified custodian”.
- Insurance – A CTP must obtain a financial institution bond insurance policy that satisfies the regulatory requirements applicable to other registered securities dealers. Generally, CTPs must arrange for third party guarantees and/or self-insurance of hot wallet losses, which are generally excluded from such policies.
- Loss Limits – CTPs must recommend loss limits based on the client’s risk tolerance and take “meaningful” action once a client begins incurring losses.
- Risk Disclosure – clients must be provided with a risk disclosure document that clearly sets out the risks of trading in crypto rights contracts, the risks of each crypto asset available for trading on the platform, the due diligence performed by the CTP and other specified matters.
- Know your Product – CTPs must conduct diligence to satisfy themselves that none of the crypto-assets available for purchase on their platform are securities or derivatives, obtaining legal advice if necessary to make this determination.
- Ongoing CSA Reporting – CTPs must provide frequent, and ongoing, reporting to the securities regulator in respect of activity occurring on the platform.
- Prohibition on Margin & Leverage – CTPs, even those that are CIRO members and investment dealers, have been prohibited from extending margin or leverage to their clients.
II. Investment limits are mostly unique to CTPs
Many of these safeguards go above and beyond the requirements imposed on other registered securities dealers. For example, there are many parallels between the business model of a CTP and that of an order-execution-only platform (OEO Dealers). OEO Dealers provide their clients with access to an online trading platform to trade securities, on their own, without receiving any recommendations or suitability assessments. However, unlike CTPs, OEO Dealers are generally not subject to: investment limits, prohibited from offering margin or leverage, or required to perform a product or account-type appropriateness assessment. [4]
III. SCA designation is ambiguous, out-dated and “clunky”
It is unclear what criteria staff of the Canadian Securities Administrators (“CSA”) have used in determining which crypto assets will not be subject to any investment limits. The CSA has not published any guidance on the SCA designation and, as noted earlier, the list of SCAs has largely remained unchanged since the first CTP was registered in 2020. Additionally, the SCA designation is inconsistent with the criteria published by the CSA in respect of the Public Crypto Asset Funds (discussed further below).
Despite this lack of guidance, in attempting to decode what a SCA is, it appears that certain factors may be more relevant than others:
Classification as a non-Security and/or Derivative
A common linkage has been the CSA’s historical comfort with the SCAs not being classified as a security and/or derivative under Canadian securities legislation. For example, in 2019, a panel for the Ontario Securities Commission specifically stated that bitcoin “is a commodity and not an equity or other security”.[5] This decision cleared the path for the world’s first publicly traded bitcoin investment fund that was shortly followed by the OSC’s approval for ether investment funds. From 2019 to 2024, bitcoin and ether remained the only crypto assets permitted to be the underlying asset of a publicly traded investment fund.
Market Capitalization
Another common linkage between the existing SCAs is that they have traditionally been the crypto assets with the greatest liquidity and market capitalization. For example, a historical snapshot of the global market capitalization on global crypto asset trading platforms in 2020, when the first CTP was registered in Canada, has the SCA ranking as the following: bitcoin (1), ether (2), bitcoin cash (5) and litecoin (7).[6]
While bitcoin and ether have maintained their respective rankings, bitcoin cash and litecoin have suffered a significant drop in their popularity and there are now several other crypto assets that have a significantly greater liquidity and/or trading volume (e.g., Solana, XRP, Cardano, Dogecoin, Tron, etc.).
Inconsistent with CSA’s Criteria of Crypto Assets for Public Funds
If the SCA designation is intended to capture the CSA’s comfort with certain crypto assets, the SCAs should at, minimum, be expanded to include the crypto assets that are permitted to be invested in directly or indirectly by reporting issuer investment funds (Public Crypto Asset Funds). Earlier this year, in amendments to National Instrument 81-102 Investment Funds Pertaining to Crypto Assets[7], the CSA stated that Public Crypto Asset Funds would be permitted to investment in “fungible crypto assets that are listed for trading on, or are the underlying interest for a specified derivative that trades on, an exchange that is recognized by a securities regulatory authority in Canada”. For example, this would include futures and options contracts on certain crypto assets that trade on CFTC-regulated markets. This has similarly been reflected in recent approvals granted to Public Crypto Asset Funds where the underlying crypto assets were Solana and XRP.[8]
Despite the CSA’s comfort with permitting retail investments to obtain exposure to a broader range of crypto assets on an unrestricted basis through Public Crypto Asset Funds, purchases of these same crypto assets on CTPs continue to be subject to investment limits.
Difficult to Update SCAs
Even in the event that the CSA is receptive to designating additional crypto assets as SCAs, it is presently hindered by the existing process whereby SCAs have been designated in the CTP’s decision document that grants them with discretionary exemptive relief. As a result, in the normal course, each CTP would be required to file an application (including the applicable fee) to amend their decision document to include additional crypto assets as SCAs. In the event that other crypto assets would meet the eligibility criteria to be an SCA, this process would need to be repeated unless the specified list of designated SCAs is removed from an individual CTP’s decision document.
While the CSA may be tempted to continue the SCA approach and sidestep the challenges noted above (e.g., by referencing an external document), this is not the best response to foster innovation and economic growth in the Canadian capital markets. Rather, for all of the reasons discussed in this article, the appropriate response is the complete removal of investment limits on retail clients of CTPs.
IV. Inconsistent with global trends and international developments
Global trends and developments in the digital asset space have been focused on promoting regulatory clarity and removing regulatory barriers. For example, the U.S. has committed to becoming the “crypto capital of the world” and adopting a pro-innovation mindset toward digital assets and blockchain technologies[9]. However, even under the U.S.’s existing framework for CTPs, investment limits have not been placed on retail investors. Additionally, the UK’s proposed regulatory framework[10] for crypto asset trading platform also does not include this restriction.
The divergent approach by Canadian securities regulators on investment limits risks placing domestic CTPs at a growing competitive disadvantage.
Final Thoughts
For the reasons identified above, it is long overdue for Canadian regulators to seriously reconsider the substantive value of investment limits.
[1] At the of time of this article, there are 4 CIRO member CTPs.
[2] Accordingly, no investment limits apply for the purchase of non-SCAs in these jurisdictions.
[3] See section 2.1 of National Instrument 45-106 Prospectus and Registration Exemptions.
[4] Please see “Guidance on order execution only account services activities”, published on December 31, 2021, available here: https://www.ciro.ca/newsroom/publications/guidance-order-execution-only-account-services-and-activities.
[5] Please refer to the Reasons and Decision: In the Matter of 3iQ Corp, dated 2019, available here: https://www.osc.ca/sites/default/files/pdfs/proceedings/rad_20191029_3iq-2.pdf.
[6] Please refer to https://coinmarketcap.com/historical/20200731/, for the date July 31, 2020.
[7] Please see the CSA Notice of Amendments to National Instrument 81-102 Investment Funds Pertaining to Crypto Assets, available here: https://www.osc.ca/sites/default/files/2025-04/csa_20250417_81-102_investment-funds.pdf.
[8] Please refer to Purpose XRP ETF Receives OSC Receipt, Set to Launch on TSX on Wednesday, June 18, 2018, dated June 16, 2025, available: https://www.purposeinvest.com/thoughtful/purpose-xrp-etf-receives-osc-receipt-set-to-launch-on-tsx-on-wednesday-june-18-2025.
[9] Please refer to the U.S. President’s Working Group on Digital Asset Markets published on July 30, 2025, available here: https://www.whitehouse.gov/wp-content/uploads/2025/07/Digital-Assets-Report-EO14178.pdf.
[10] Please refer to Discussion Paper 24/4 published by the FCA on February 2, 2025.