Canada enacts new law to protect investors after Quadriga fraud case

The context surrounding this fraud case

The 2019 collapse of Quadriga exposed fundamental weaknesses in its data storage, governance, and disclosure. Client funds were mixed , private keys were allegedly controlled by a single individual , and basic record-keeping was lacking. When the exchange failed, users had no effective way to reclaim their rights.

To directly address the lingering consequences of the QuadrigaCX collapse (in 2019) — where the death of founder Gerald Cotten left approximately C$190 million of customer funds inaccessible — Canadian regulators have finalized a comprehensive new set of rules aimed at protecting individual cryptocurrency investors.

These measures, jointly announced by the Securities and Exchange Commission of Canada (CSA) and the Canadian Investment Regulatory Organization (CIRO) on February 3, 2026, represent the most comprehensive investor protection overhaul for cryptocurrency platforms since the platform bankruptcy crisis.
The new regulations address several shortcomings.

The new legal framework focuses on operational integrity and transparency, addressing the very shortcomings that Quadriga has uncovered. Key themes include:

• Tighter control and segregation of client assets.

• Strengthen internal governance and control.

• Greater transparency regarding risks and business operations.

• Strengthen accountability for executives and board members.

The goal is not to eliminate cryptocurrency risk—but to ensure that the failure of a platform does not automatically result in the complete loss of all invested capital.

Storing and proving control

One of the most significant changes relates to custody requirements. Platforms will be required to demonstrate verifiable control and custody of customer assets, reducing reliance on opaque internal wallets or single-key structures. Independent, third-party verified custody solutions are likely to become the standard.

For cryptocurrency exchanges operating in Canada, compliance costs will increase. Smaller or undercapitalized platforms may leave the market rather than meet the new standards. Larger companies, especially those already compliant with traditional financial regulations, will benefit from reduced competition and increased trust.

Canada's position in law enforcement.

Critics argue that stricter regulations could stifle innovation or push operations overseas. Managers counter that innovation built on weak governance is unsustainable—and long-term adoption requires trust.

Canada's approach reflects the belief that reliable consumer protection is a prerequisite for building trust with institutions and individual investors, rather than an obstacle to growth.

These changes bring Canada closer to other advanced nations that are pursuing structured cryptocurrency regulation, rather than arbitrary experimentation. By building on past failures, the Canadian government is shaping regulation as lessons learned, rather than an ideological opposition to cryptocurrencies.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrency. This is not financial or investment advice. All investment decisions should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official stance of the platform. We recommend that readers conduct their own research and consult with experts before making any investment decisions.

Compiled and analyzed by HCCVenture

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