October 23, 2025
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction)
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF THE FUNDS (as defined below)
AND
IN THE MATTER OF 3iQ CORP. (the Manager, and together with the Funds, the Filers)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption pursuant to section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102) from:
(a) paragraph 6.1(3)(b) of NI 81-102 to permit, ADB (as defined below), which is not a person or company described in section 6.2 or 6.3 of NI 81-102, to be appointed as a sub-custodian of the Funds to hold the Funds’ Crypto Assets (as defined below), and
(b) section 6.3 of NI 81-102 to permit ADB to be appointed as a sub-custodian of the Funds to hold the Funds' Crypto Assets outside of Canada
(collectively, the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each other province and territory in Canada (together with the Jurisdiction, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102, and securities legislation have the same meaning if used in this Decision, unless otherwise defined in this Decision.
For the purposes of this Decision, the following terms have the following meanings:
(a) “ADB” means Anchorage Digital Bank, National Association.
(b) Crypto Assets means anything commonly considered a crypto asset, digital or virtual currency, or digital or virtual token, and includes, Bitcoin, Ether, Solana and XRP.
(c) The Existing Funds means each investment fund, for which the Manager is the investment fund manager as of the date of this decision, that is a reporting issuer subject to NI 81-102 and has investment objectives that permit it to directly invest in and hold Crypto Assets.
(d) Funds means the Existing Funds and the Future Funds.
(e) Future Funds means any investment funds established in the future, for which the Manager or an affiliate act as investment fund manager, that are reporting issuers subject to NI 81-102 have investment objectives to permit them to directly invest in and hold Crypto Assets.
(f) Manager means 3iQ Corp.
Representations
This Decision is based on the following facts represented by the Filers:
The Manager
The Manager is a corporation established under the laws of the Province of Ontario with its head office located in Toronto, Ontario.
The Manager is registered as (i) a portfolio manager in Alberta, Ontario and Quebec; (ii) an exempt market dealer in Alberta, British Columbia, Ontario and Quebec; (iii) an investment fund manager in Alberta, Ontario and Quebec; and (iv) a commodity trading manager in Ontario.
The Manager is the trustee, manager and portfolio adviser of the Existing Funds. The Manager or an affiliate will be the investment fund manager of the Future Funds.
The Manager is not in default of securities legislation in any of the Jurisdictions.
The Funds
Each Fund is, or will be, an “investment fund” as defined in Canadian securities legislation and is or will be established under the laws of Canada or a Jurisdiction.
The securities of each Fund are, or will be, qualified for distribution pursuant to a prospectus that has been prepared, filed and granted a prospectus receipt under the securities legislation of one or more Jurisdictions. The Funds are or will be reporting issuers subject to NI 81-102.
The Funds have or will have investment objectives that permit them to invest in Crypto Assets through direct investment.
The Existing Funds are not in default of securities legislation in any of the Jurisdictions.
Custody of Fund Assets
Tetra Trust Company (Tetra), an Alberta trust company, is currently the custodian for the Existing Funds’, pursuant to an amended and restated custody Agreement dated February 6, 2025 and in accordance with the requirements of section 6.1 of NI 81-102. The custodians of the Future Funds will also be appointed in accordance with NI 81-102.
Coinbase Custody Trust Company, LLC (Coinbase) was appointed as the sub-custodian for the Existing Funds pursuant to a custodian agreement dated October 11, 2022, as amended from time to time, between the Manager, Tetra and Coinbase and in accordance with the requirements of section 6.3 of NI 81-102. The Crypto Assets in the Funds’ portfolio are currently held by Coinbase in that capacity.
Why the Requested Relief is Needed.
The Manager wishes to appoint ADB as an additional sub-custodian in order to also hold the Funds’ Crypto Assets outside of Canada.
The Manager has assessed whether ADB meets the criteria set forth in section 6.3 of NI 81-102 to permit ADB to be appointed as a sub-custodian of the Funds to the hold the Funds’ Crypto Assets outside of Canada and has determined that ADB satisfies these criteria, except for the requirement in subsection 6.3(2) that a sub-custodian of fund assets held outside of Canada have equity, as reported in its most recent audited financial statements of $100 million (the Equity Requirement).
In addition, ADB is not an affiliate of an entity that satisfies the necessary criteria in subsection 6.3(3) of NI 81-102.
The Requested Relief is needed in order for ADB to be appointed as a sub-custodian for the Funds.
ADB
- The Manager represents the following, based solely on information provided to it by ADB:
ADB Regulatory Status
(a) ADB is a national trust bank chartered by the Office of the Comptroller of the Currency (OCC) in the United States. ADB received its U.S. federal banking charter in January 2021. ADB offers digital asset custody and settlement solutions, among other services, to institutional clients and certain high net worth individuals, pursuant to the terms of its operating agreement with the OCC (the Operating Agreement).
(b) Pursuant to its Operating Agreement, ADB is subject to oversight by the OCC to ensure that it meets stringent compliance and anti-money laundering requirements, including the Basic Capital Requirement (as defined below).
(c) As a federally chartered trust bank, ADB is a member of the Federal Reserve and has full fiduciary powers under the U.S. Code of Federal Regulations, Title 12 Part 9 governing fiduciary activities of national banks.
(d) ADB is one of the types of entities that can serve as a “qualified custodian” under the U.S. Investment Advisers Act of 1940 (the Advisers Act) in its status as a bank defined in section 202(a)(2) of the Advisers Act, subject to other requirements.
(e) As a federally chartered trust bank, ADB is deemed a “good control location” pursuant to the U.S. Securities Exchange Act of 1934 so long as, among other things, ADB has acknowledged that the client securities are not subject to any right, charge, security interest, lien or claim of any kind in favour of the ADB or any person claiming through ADB and the securities are in the custody or control of ADB.
Anchor Labs and ADB’s Capital Requirements
(f) ADB is a wholly owned subsidiary of Anchor Labs, Inc. (Anchor Labs), a Delaware corporation incorporated on October 27, 2017. Anchor Labs is not regulated as a banking institution or trust company under the U.S. federal or state laws, for the purposes of paragraph 6.3(2)(b) of NI 81-102.
(g) The Operating Agreement among other things, prescribes the minimum capital ADB is required to maintain at all times in connection with its status as a federally chartered trust bank (the Basic Capital Requirement).
(h) Pursuant to OCC requirements, ADB maintains at all times a liquidity buffer equivalent to 6-months of operating expenses.
(i) ADB has entered into a “capital and liquidity support agreement” with Anchor Labs and the OCC and a “capital assurance and liquidity maintenance agreement” with Anchor Labs that set forth ADB’s right and obligation to seek and obtain all necessary capital and liquidity support from Anchor Labs and Anchor Labs’ obligation to provide ADB with such support. These agreements require Anchor Labs to provide ADB with all financial support necessary to ensure the maintenance of capital and liquidity in accordance with the Basic Capital Requirement and additional requirements set out in the Operating Agreement.
ADB’s Security Technology
(j) ADB employs industry-leading security measures and crypto-native capabilities, ensuring safety and security in asset custody. Sensitive operations necessitate a consensus of approvals, and multiple well-defined “quorum” authorizations from clients and ADB’s personnel are mandatory for transaction processing. The use of advanced biometrics and behavioral analytics enhances user identification, while clients possess unique cryptographic keys stored in secure client-side hardware.
(k) ADB generates asset-holding private keys which are processed in air-gapped hardware security modules (HSMs). HSMs, as widely adopted in the industry, are generally acknowledged to offer a robust solution for safeguarding custody clients’ private keys. These physical devices, integrated with servers, provide a layer of physical security, substantially mitigating unauthorized access risks.
(l) Within HSMs, private keys are securely processed and any attempt to move them beyond the HSM’s physical boundary triggers immediate encryption, rendering them unusable except by trusted secure execution engine (SEE) software. Code running on the SEE undergoes rigorous validation and is signed by trusted parties to ensure the absence of malicious code, underscoring the stringent control over both hardware and software.
(m) Private keys remain safeguarded and accessible only within authorized contexts.
(n) HSMs are equipped with tamper-resistant and tamper-evident features, adhering to industry standards such as FIPS PUB 140-2 Level 3. This high level of physical security provides robust protection against physical tampering and unauthorized access, crucial to handling Crypto Assets.
(o) HSMs are isolated from external networks and the public internet, maintaining an air-gap that substantially reduces the risk of cyberattacks and data breaches. Private key operations exclusively occur within the secure confines of the HSM’s hardware environment, adding an extra layer of defense against external threats.
(p) In all cases, client protection remains paramount, with bankruptcy remoteness, segregated custody for client assets, verifiable on-chain assets, and institutional financial audits conducted by Ernst & Young LLP (EY). ADB has completed a Service Organization Controls (SOC) report under the SOC 1 -- Type 2 and the SOC 2 - Type 2 standards from EY.
ADB’s Resolution Planning Framework
(q) ADB maintains a risk-based resolution planning framework, overseen by ADB’s board of directors (Board) to address key loss scenarios, such as cyber events and market crashes.
(r) An executive crisis response team is maintained as part of ADB’s complementary business continuity management and disaster recovery programs, with designated individuals assigned to facilitating execution of ADB’s resolution plan, if triggered.
(s) In the event of ADB’s resolution, Anchor Labs is committed to providing financial support pursuant to the terms of the CSA and CALMA, including additional infusions of capital and liquidity as required, in order to enable an orderly wind-down or sale. If ADB is unable to continue operations and provide custody services, ADB would be wound down with remaining assets under custody being transferred to clients and/or an identified third-party custodian, as applicable.
ADB’s Operational Processes
Custodial Fiduciary Compliance
(t) ADB does not put client assets on its balance sheet as it is not the beneficial owner of client assets. Instead, under generally accepted accounting principles, client assets are noted in ADB’s financial statements as assets held in trust for the benefit of clients.
(u) As a national trust bank authorized by the OCC to exercise fiduciary powers, ADB is required to segregate all assets held in a fiduciary capacity from the general assets of ADB, as well as to keep a separate set of books and records showing in proper detail all transactions engaged in.
(v) Moreover, ADB is required to undergo an annual audit of all significant fiduciary activities. This annual audit, among other matters, verifies that ADB maintains the segregation of client assets from those maintained on its own balance sheet. ADB’s internal audit function serves as the third line of defense for ADB, independent from the business and tests the non-commingling of client and firm assets as part of the annual audit of the fiduciary activities of ADB.
(w) ADB’s custody client records are maintained separate from the books and records of ADB. These records:
(i) Contain full information relative to each account, including information regarding the establishment and termination/closing of such accounts required pursuant to ADB’s custodial account policies and under applicable law;
(ii) Clearly reflect the interests of the various account holders and permit thorough and satisfactory audit and supervisory review; and
(iii) Are retained, with an appropriate level of information security, for a period of five years from the later of the termination of the account or the termination of any litigation relating to the account, or other time frames required under applicable law, whichever is greater.
(x) Crypto Assets are maintained through segregated accounts and may be further segregated within sub-accounts beneath a client account by multiple vaults. Within each vault, a client may have multiple Crypto Asset addresses dedicated to a variety of Crypto Assets. Each vault is segregated from every other vault within a client’s organization account with ADB and ensures full separation of multiple assets, segregated on-chain.
(y) Operationally, ADB periodically reconciles its internal records of client asset balances against data on the blockchain to ensure its internal records have not diverged from the blockchain source of truth. Specifically, a reconciliation script is configured to run at least daily and verify the previous day’s transactions recorded are consistent with the blockchain’s records.
(z) If the reconciliation script identifies a discrepancy between ADB’s systems and the blockchain, it sends an alert to Anchor Labs’ engineering team. The engineering team investigates each alert and documents resolution according to Anchor Labs’ and ADB’s incident management processes. Similarly, if the reconciliation script fails to return a discrepancy report, indicating the script may have failed to start or experienced an error while running, an alert is also sent to the engineering team for resolution.
Dual Controls
(aa) Under U.S. federal banking law, ADB ensures dual controls are in place with respect to fiduciary assets pursuant to 12 CFR 9.13(a), which requires:
A national bank shall place assets of fiduciary accounts in the joint custody or control of not fewer than two of the fiduciary officers or employees designated for that purpose by the board of directors.
(bb) ADB’s operations and related staffing follow a dual-controls design with maker and checker roles to meet this fiduciary requirement. Procedures detail how dual controls are in place at all times when any Crypto Assets are being transferred; controls exist to prevent a single individual from unilaterally taking action related to the custody and control of client assets.
Transaction Initiation and Institutional Intent
(cc) Each vault must have a minimum of three approvers, as well as a minimum quorum of two users. Within those parameters, the total number of approvers and minimum quorum can be customized as needed. Clients authenticate directly to ADB’s HSMs through multi-signature policies.
(dd) ADB’s unique security architecture allows for Crypto Assets to be stored offline and air-gapped at all times but still allows for quick speed and settlement. ADB’s iOS application allows it to quickly acquire a client’s intent behind a transfer, and to verify user identity as long as users have their device within their possession. Once a quorum of users has authenticated a transfer, ADB’s risk review team evaluates the details of the transfer and ensures that the transfer is compliant as it relates to ADB’s AML (as defined below) and sanctions screening requirements. Once approved, the details are sent to the HSM, where the transfer is signed within the platform’s HSM. ADB’s average transaction speeds are about 15 minutes, with over 90% of all transfers completed within 20 minutes.
ADB’s Financial Crimes Compliance Program
(ee) ADB is committed to maintaining compliance with all applicable Anti-Money Laundering and Anti-Terrorist Financing laws, rules and regulations (collectively “AML”) and sanctions laws, rules and regulations.
(ff) ADB maintains a robust financial crimes compliance program, consistent with its regulatory obligations pursuant to the Bank Secrecy Act, as amended by Title III of the USA PATRIOT Act and supplemented by the Anti-Money Laundering Act of 2020, in order to deter, detect, and report the use of its products, services, and delivery channels for illegal purposes.
(gg) ADB is committed to full compliance with sanctions regulations administered by the relevant authorities of the United States and any other countries or jurisdictions in which it operates, including screening for international sanctions lists, such as the United Nations Security Council Consolidated List.
(hh) ADB maintains comprehensive risk-based AML and sanctions programs, overseen by its Board, covering effective know-your-customer processes, transaction monitoring and sanctions screening, regulatory reporting, and training. These programs are supported by leading technologies, including blockchain analytics, and sufficient staffing to administer the day-to-day operations of these programs.
(ii) Pursuant to the ADB’s Operating Agreement, ADB maintains industry-leading financial crimes compliance controls, including full implementation of compliance with the Travel Rule, consistent with Financial Action Task Force Recommendation 16.
(jj) ADB’s financial crimes compliance controls are subject to regular monitoring and testing and annual independent testing.
(kk) ADB’s financial crimes compliance systems are subject to periodic model validation to ensure ongoing operating effectiveness.
Insurance Coverage
(ll) Anchor Labs has a comprehensive crime insurance policy which covers a certain amount of losses of assets in custody at ADB.
(mm) The crime insurance policy covers losses up to USD100,000,000 and spans the life cycle of assets under custody, consistent with industry norms in view of ADB’s security infrastructure and low likelihood of loss.
(nn) The policy is bound by Endurance Worldwide Insurance Limited (Sompo), one of the world’s largest insurance brokers, with Lloyd’s of London acting as insurer.
Parental Guarantee
ADB is continuing to grow its business and, solely based on the assumption that ADB’s growth maintains a similar trajectory as in recent years ADB anticipates satisfying the Equity Requirement within three (3) years of the date of this Decision.
Anchor Labs has provided to ADB a guarantee in the amount of $100,000,000 that will be made available to ADB in connection with ADB’s custodial obligations the Funds (the Parental Guarantee).
Anchor Labs has equity, as reported on its most recent audited financial statements, in excess of $100,000,000, and will hold cash and cash equivalents in an amount sufficient to satisfy its obligations under the Parental Guarantee during any period when ADB does not satisfy the Equity Requirement.
Custodial Services Agreement
The Manager will appoint ADB to act as the sub-custodian of the Crypto Assets for the Existing Funds and potentially the Future Funds pursuant to the terms of a custodial services agreement between the Manager, on behalf of the Funds, Tetra and ADB (the ADB Custodial Services Agreement), that shall comply with all of the requirements in Part 6 of NI 81-102, other than the matters covered in the Requested Relief. Pursuant to the Custodial Services Agreement, ADB will not be permitted to pledge, re-hypothecate or otherwise use any Crypto Assets held as sub-custodian for the Filers in the course of its business or otherwise.
The Manager will be entitled to automatically terminate the provision of sub-custodial services by ADB and will cease to use ADB as a sub-custodian if the Parental Guarantee is no longer in effect or Anchor Labs no longer has cash or cash equivalents in an amount sufficient to satisfy its obligations under the Parental Guarantee for any period in which ADB is unable to satisfy the Equity Requirement. In such case, the Manager will identify a suitable alternative custody provider that qualified as a sub-custodian under section 6.3 of NI 81-102, to hold the Crypto Assets.
Generally
The Manager is satisfied that ADB is able to comply with all of the necessary requirements for the provision of custody services to the Funds under the applicable provisions in Part 6 of NI 81-102 and will consent to its appointment as a sub-custodian to the Funds if the Requested Relief is granted.
The Manager, in compliance with its fiduciary duty to the Funds, believes the appointment of ADB as a sub-custodian to the Funds is in the best interest of the Existing Funds and will be in the best interest of the Future Funds, as applicable.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The Decision of the Principal Regulator under the Legislation is that the Requested Relief is granted, provided that:
During any period when the Funds’ Crypto Assets are being held by ADB in its capacity as a sub-custodian and its most recent audited financial statements indicate that ADB does not satisfy the Equity Requirement, the Manager will take reasonable steps to verify that the Parental Guarantee remains in effect.
The Filers will cease to use ADB and be entitled to terminate the ADB Custodial Services Agreement if, during a period where ADB does not satisfy the Equity Requirement, (i) the Parental Guarantee is no longer in effect; (ii) Anchor Labs no longer has cash or cash equivalents in an amount sufficient to satisfy its obligations under Parental Guarantee; or (iii) ADB no longer qualifies as a sub-custodian under any other criteria prescribed in section 6.3 of NI 81-102. In such case, the Manager will identify and appoint a suitable alternative custody provider that qualifies under the criteria established in section 6.3 of NI 81-102 to act as a sub-custodian for the Funds.
The Manager, on behalf of the Funds will promptly notify the principal regulator if the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission, the Financial Industry Regulatory Authority and the National Futures Association or the OCC, makes a determination that ADB is not permitted by that regulatory authority to hold clients’ Crypto Assets. In such case, the Manager will identify and appoint a suitable alternative custody provider that qualifies under the criteria established in section 6.3 of NI 81-102 to act as a sub-custodian for the Funds.
“Darren McKall”
Darren McKall Associate Vice President, Investment Management Division ONTARIO SECURITIES COMMISSION
Application #2025/0186
SEDAR Project# 6265326