The Canadian Securities Administrators (CSA) have adopted a comprehensive set of amendments to National Instrument 81-102 Investment Funds, introducing new regulatory conditions for investment funds that directly or indirectly hold crypto assets.
The amendments, effective July 16, 2025, apply to “Public Crypto Asset Funds”—reporting issuer investment funds seeking exposure to crypto markets—and establish clear criteria around asset eligibility, fund structure, and custody obligations.
Asset Eligibility and Fund Type Restrictions
The amendments clarify that alternative mutual funds are now permitted to invest in crypto assets, explicitly adding “crypto assets” to the definition of what such funds may hold, alongside physical commodities and specified derivatives.
Section 2.3(1)(j) imposes a general restriction against mutual funds purchasing, selling, using, or holding crypto assets or derivatives based on them—unless they meet new exemptions under subsections 1.3 and 1.4:
Under subsection 1.3, alternative mutual funds may hold crypto assets only if the asset is fungible and either:
Trades on an exchange recognized by a securities regulator in Canada (excluding British Columbia), or
Is the underlying of a specified derivative traded on a recognized exchange.
In British Columbia, an additional provision allows crypto assets that trade on exchanges designated specifically for this purpose.
Subsection 1.4 permits mutual funds to enter into exchange-traded derivatives linked to crypto assets, provided the trading venue is recognized by a securities regulator (or designated, in the case of British Columbia).
For all other types of reporting issuer investment funds, new paragraphs 2.3(2)(d) and (e) ban direct investments in crypto assets or crypto-based derivatives unless they qualify under these exceptions.
Crypto Custody Requirements: Offline Storage and Assurance Reporting
The amendments add new technical obligations regarding the custody of crypto assets. Section 6.5.1 mandates offline (cold) storage for private keys held by custodians or sub-custodians, except where hot storage is necessary to facilitate a transaction.
Additionally, a new subsection under 6.7 imposes mandatory annual assurance reporting for any custodian or sub-custodian holding crypto assets on behalf of an investment fund:
Within 90 days after the reporting period, a public accountant must issue a reasonable assurance opinion on the custodian’s internal controls related to crypto custody.
These reports must be shared promptly with the fund or, in the case of sub-custodians, with both the custodian and the fund.
Importantly, no custodian or sub-custodian may hold crypto assets unless a report has been received that is less than 15 months old at the time of custody, ensuring ongoing scrutiny.
If custody arrangements are terminated and later resumed, the reporting requirement resets as if custody were being assumed for the first time.
The fund’s disclosure documents must now also include whether the custodian or sub-custodians have delivered the required assurance report.
In-Kind Subscriptions Using Crypto Assets
An amendment to section 9.4 introduces a pathway for accepting in-kind subscriptions using crypto assets that are not securities, provided they:
Are permissible assets under the fund’s investment strategy.
Are deemed acceptable by the portfolio adviser.
Match or exceed the issue price of the fund securities being purchased, using the fund’s valuation criteria.
Regulatory and Industry Impact
These amendments collectively aim to balance innovation in fund structuring with investor protection. The CSA stated its objective was to “provide guardrails in this evolving sector” and support the development of compliant crypto fund products.
Stan Magidson, CSA Chair and CEO of the Alberta Securities Commission, commented, “Canadian securities regulators are committed to enhancing investor protections and supporting the stability and strength of our capital markets. By implementing regulations around crypto asset offerings, we aim to provide guardrails in this evolving sector.”
The new framework places Canadian crypto fund regulation among the most technically detailed globally, particularly in areas like custody standards and asset eligibility. Firms seeking to launch or maintain crypto asset funds in Canada will need to align internal operations with the new assurance and storage obligations before mid-2025.