Crypto cross-border tax: US exchanges, T1135, and the two-rulebook problem

A US exchange account is a T1135 problem, not a US tax problem

A Canadian resident trading crypto through a US platform owes the IRS nothing on the gains: you are not engaged in a US trade or business, and gains on property sold by a non-resident are sourced to where you live. There is no 1040-NR to file for a trading year, however large.

The Canadian disclosure is the real obligation. CRA treats crypto held on a foreign exchange as specified foreign property — funds or intangible property situated outside Canada — so those balances count toward the Form T1135 threshold of $100,000 CAD in total cost at any time in the year, alongside any US brokerage account or US rental you already report. Miss it and the penalty runs $25 a day to $2,500 per year even when every gain was declared. Coins on a Canadian-registered platform generally sit outside the form, and self-custodied wallets raise a situs question the Income Tax Act never anticipated — we take a documented position rather than guessing, and for accounts with the Canadian arm of a global exchange we read the custody terms before deciding.

Business income or capital gains: CRA reads your pattern

The characterization question dwarfs everything else on your Canadian return, because business income is 100% taxable while capital gains are half. CRA weighs the same factors it uses for securities traders: transaction frequency, holding periods, leverage, time spent, and your knowledge of the market. A few long holds sell as capital gains; hundreds of leveraged swing trades look like an adventure in the nature of trade, and you do not get to re-pick the answer each spring to suit the result.

• Every swap is a disposition. Trading ETH for SOL is a taxable event at fair market value in CAD, not a deferral.
• Cost base is averaged. Identical coins across every wallet and exchange share one ACB, converted at the rate on each acquisition date.
• Superficial loss rules apply. Sell at a loss and rebuy the same coin within 30 days, and the loss is denied if you are on capital account.
• Staking and mining rewards are generally business income at fair market value when received, with that value becoming cost base for the eventual sale.

The domestic fight — including how we document a capital position before CRA asks — lives on our crypto investor tax services page.

CARF ended the visibility gap in 2026

Canada implemented the OECD's Crypto-Asset Reporting Framework effective January 1, 2026: exchanges and other crypto service providers dealing with Canadian users must collect identity and transaction data and report it, with the first filings reaching CRA in 2027 for the 2026 year. Combined with the crypto question already sitting on the T1, the era of invisible exchange accounts is over. If prior years have gaps — unreported swaps, missed T1135s, staking income never picked up — a voluntary disclosure filed before CRA makes contact is worth far more than one filed after, and we can quantify the exposure before you decide.

US persons holding crypto in Canada: one portfolio, two rulebooks

A US citizen or green-card holder in Brampton reports every disposition to both tax authorities, and the systems disagree on almost every mechanic. The US taxes crypto as property with short- and long-term rates, tracks basis by lot and now by wallet, and — because crypto is not stock or securities — its wash-sale rule currently does not apply. Canada averages cost base, has no holding-period discount, and does deny superficial losses. The same trade can produce two different gains, reconciled only through foreign tax credits we calculate line by line.

The FBAR carve-out is narrower than it sounds: FinCEN's current guidance excludes accounts holding only virtual currency, but a Canadian exchange account holding crypto plus a cash balance is a different analysis, and FinCEN has signalled the exclusion will eventually close. For US-person clients we review every account, not just the obvious ones.

Source: IRS — Digital assets.