Cryptocurrency Held Through a Bare Trustee: Tax Treatment and the 2026 Reporting Obligations

Current to October 22, 2026. Dates for the Crypto-Asset Reporting Framework depend on Bill C-31 as enacted.

Overview: Bare Trusts and Canadian Cryptocurrency Holders

If you hold cryptocurrency, NFTs or other blockchain assets in someone else’s wallet, or hold assets in your own wallet for someone else, the arrangement is very likely a bare trust. Until recently, that carried almost no compliance consequence. It now carries three reporting obligations to track: the T3 filing for 2026, the T1135, and the proposed Crypto-Asset Reporting Framework from 2027.

This article explains what a bare trust is, how it is taxed when the property is a digital asset, how to tell whether one exists, and what must now be filed. The reporting position has changed materially since this article was first published, and the change runs against the taxpayer.

Key Issues and Findings

The filing position has reversed

The most important correction to the earlier version of this article concerns the T3 return. When this article was first published, a bare trust did not have to file a T3 trust income tax return. Subsection 104(1) of the Income Tax Act deems a bare trust not to be a trust for income tax purposes, and no separate filing obligation applied.

That is no longer the whole answer. Certain bare trusts must file a T3 return, including Schedule 15 beneficial ownership disclosure, for taxation years ending on or after December 31, 2026. Because a bare trust is required to have a calendar year end, the first returns fall due in the spring of 2027. The substantive tax treatment in subsection 104(1) is unchanged, and that is the trap: the arrangement is still ignored for the purpose of computing tax, and is no longer ignored for the purpose of reporting.

The sequence that produced this is worth knowing, because a client advised in 2024 may believe the matter is closed. Bill C-32 originally required bare trusts to file starting with 2023. On March 28, 2024 the CRA announced it would not require a 2023 filing. The original rule was then repealed retroactively, so no filing was required for 2024 or 2025 either. The obligation now arising for 2026 is a new one under a different provision. Our analysis of what happened to bare trust reporting between 2023 and 2026 traces the sequence in full.

“Crypto holders are the group most likely to be caught unaware here, because the arrangements are casual by nature. A friend holds the keys, a relative made the purchase, the corporation trades through a wallet still in the founder’s name. None of that feels like a trust, and all of it can be one.”

David J. Rotfleisch, Certified Specialist in Taxation Law (Law Society of Ontario)

How a bare trust is taxed when the property is a digital asset

The tax treatment is unchanged and remains favourable.

Although subsection 104(2) deems a trust to be an individual for income tax purposes, that deeming rule does not apply to an arrangement under which the trust can reasonably be considered to act as agent for all beneficiaries with respect to all dealings with all of the trust’s property. The consequence is that where a person retains beneficial ownership of cryptocurrency, NFTs or other blockchain assets while transferring legal title to a bare trustee, for example by moving the assets to the bare trustee’s wallet, the transfer is not a disposition and triggers no capital gains tax.

Where the bare trustee later sells the assets on the beneficiary’s direction, the transaction is taxed as though the beneficiary had dealt with the third party directly, and the beneficiary reports the gain or loss, on a capital or income account depending on the facts. A bare trust is also outside the 21-year deemed disposition rule in subsection 104(4), so it is not forced to realize accrued gains every 21 years.

Compare that with an ordinary trust, which is deemed an individual, must file a T3 each year, pays tax at the top marginal rate on income retained in the trust, and is subject to the 21-year rule. Settling blockchain assets into an ordinary trust is itself a disposition.

The GST/HST position, and the exception

A bare trust’s GST/HST treatment generally follows its income tax treatment, and courts will usually ignore the bare trust when applying the Excise Tax Act. This matters to NFT creators and traders, because commercial NFT sales are a taxable supply. A beneficiary selling NFTs commercially through a bare trust may need to register for GST/HST and to charge, collect and remit on Canadian sales.

The treatment is not universal. A bare trustee is not ignored for the GST/HST New Housing Rebate: in The Queen v. Cheema, 2018 FCA 45, the Federal Court of Appeal held that a new home purchaser cannot claim the rebate where a co-signer of the purchase agreement does not occupy the home, even where the co-signer acted as a bare trustee. The lesson generalizes. Confirm that a bare trust will produce the result you want before relying on it.

Three reporting obligations to track

This is the part of the analysis that has changed most, and the three obligations are distinct. An arrangement can attract all of them at once.

T3 and Schedule 15. As above, for taxation years ending on or after December 31, 2026. Schedule 15 requires the name, address, date of birth, jurisdiction of tax residence and taxpayer identification number of every trustee, beneficiary and settlor, and of any person able to exert influence over trustee decisions on the appointment of income or capital.

T1135. The foreign reporting obligation is unchanged and still applies to the beneficiary rather than the bare trustee. Cryptocurrency, NFTs and other blockchain assets are intangible property and, existing on decentralized platforms, are generally situated, deposited or held outside Canada, so they typically meet the definition of specified foreign property. Where the beneficiary’s total cost for specified foreign property exceeds $100,000 at any point in the year, the beneficiary files. The bare trustee’s position is different: bare legal title may fall within paragraph (h) of the definition, but the bare trustee’s cost for that vacuous interest should be nominal, so the $100,000 threshold will rarely be met. Note the active business exclusion, which takes out property held exclusively in the course of carrying on an active business, including inventory. A crypto trading business may hold its trading stock outside the definition on that basis.

The Crypto-Asset Reporting Framework. This is new since the earlier version of this article and is the obligation most likely to catch holders by surprise, because it does not depend on the taxpayer filing anything. Canada is implementing the OECD framework through proposed Part XXI of the Income Tax Act, in Bill C-31, the Budget 2025 Implementation Act, No. 2, which applies Part XXI to the 2027 and later calendar years. On that basis 2026 is a preparation year, 2027 is the first reporting period, and the first returns from crypto-asset service providers are due before May 2, 2028. Part XXI comes into force on Royal Assent, which the bill had not received as at October 22, 2026, when it was at consideration in committee in the House of Commons. Once in force, crypto-asset service providers must collect information about their Canadian users and report it to the CRA, with exchange of that information internationally. The practical effect will be that the CRA receives platform-level data on holdings and transactions independently of what the taxpayer reports.

A bare trust will not shelter anything from this. The platform will report on the account holder, and where the account is in the bare trustee’s name, the data reaching the CRA will show the bare trustee as the user while the tax return shows the beneficiary reporting the income. That mismatch is precisely the kind of discrepancy that generates a CRA tax audit, and it is a reason to document the arrangement rather than leave it to be explained after the fact.

Establishing that a bare trust exists

A bare trust is a trust in which the trustee has no obligation other than to deal with the property as the beneficiary directs. It is in substance an agency relationship: the bare trustee holds legal title as the beneficiary’s agent, and the beneficiary retains the rights associated with beneficial ownership, being the rights to use, possess, dispose of, earn income from and destroy the property.

Like any express trust it requires the three certainties, of intention, subject matter and object. Because the relationship is one of agency, the agency indicia apply as well: both parties must consent, the principal must have given the agent authority to affect the principal’s legal position, and the principal must retain control over the agent’s actions.

Where no instrument exists, conduct determines the question. Does the purported bare trustee deal with the assets without the beneficiary’s direction? Does the purported bare trustee take any personal benefit from them? If the person holding the keys exercises independent discretion over the assets, he or she is neither an agent nor a bare trustee, and the original transfer was a disposition at fair market value.

That last point is the risk. A transfer intended as a bare trust that fails to qualify is a taxable disposition attracting capital gains tax, and on an appreciated crypto position the gain can be substantial.

Documenting an arrangement that already exists

A bare trust arises on the facts, from the separation of legal and beneficial ownership. It exists whether or not anyone has documented it, and no written instrument is required to create one. What a written declaration supplies is proof. The CRA will frequently dispute the existence of a bare trust where nothing is in writing, which is reason enough to prepare one.

Clients then ask whether it is proper to sign a document now for an arrangement that began years ago. It is. A declaration executed today, bearing its true execution date and expressed to be made as of the date the arrangement actually began, is ordinary practice, the recital accurately records when the relationship arose, and the CRA accepts documents in that form.

Two things are different. A document signed now but presented as having been signed years ago misrepresents its own provenance. And an honestly dated document whose recital asserts a state of affairs that did not exist on the earlier date uses a legitimate drafting form to manufacture a history. The test is not when the document was written. It is whether everything it says, including about its own date and about when the relationship arose, is true.

For digital assets, the documentary record extends beyond the declaration. Wallet addresses, the source of the funds used to acquire the assets, exchange account records and the instruction history between the parties are all evidence of who controlled what, and they are more persuasive than the declaration because they are contemporaneous.

“On a crypto file the blockchain is the best evidence you will ever have, and it cuts both ways. It will show that the beneficiary funded the purchase and directed every disposition, or it will show that the person holding the keys was making his or her own decisions. Decide which story the record tells before you assert either one.”

David J. Rotfleisch, Certified Specialist in Taxation Law (Law Society of Ontario)

Practical Implications

The planning uses still work

Two arrangements remain useful, provided the reporting is handled.

A Canadian taxpayer incorporating a cryptocurrency trading business can access the small business deduction and the deferral available through a Canadian-controlled private corporation, with section 85 permitting a tax-deferred rollover of blockchain assets to the corporation at cost. Our analysis of the tax benefits of operating a cryptocurrency trading business as a CCPC sets out the wider planning. As a practical matter the owner may prefer not to move the wallets or exchange accounts out of his or her own name. A bare trust achieves that: the owner holds legal title for the corporation’s benefit, and for tax purposes the corporation is treated as dealing with the assets directly.

The second is simpler and far more common. A taxpayer who wants exposure to digital assets asks a more experienced friend or relative to make the purchase. The friend buys with the taxpayer’s money and holds as bare trustee. The tax consequences fall on the beneficial owner.

Both arrangements now carry a filing obligation they did not carry when they were set up.

What to do before the year end

Identify whether a bare trust exists, because the parties’ own description is not the test. Then determine whether it falls within the 2026 filing obligation, and if so begin assembling the Schedule 15 information, which on an undocumented family arrangement is the slowest part. Obtaining a trust account number, where none exists, has its own lead time.

An arrangement reviewed in 2024 should be reviewed again. The obligation now arises under a different provision from the one that caused the 2024 confusion, and advice given then does not carry forward.

Takeaway

The tax treatment of cryptocurrency held through a bare trustee is unchanged and remains favourable: no disposition on transfer, no T3 filing historically, no 21-year rule, and income taxed in the beneficiary’s hands.

The reporting position has reversed. Certain bare trusts must file a T3 with Schedule 15 for taxation years ending on or after December 31, 2026. The T1135 obligation continues to sit with the beneficiary. And the proposed Crypto-Asset Reporting Framework, applying from 2027, will deliver platform-level data to the CRA regardless of what anybody files, which makes an undocumented bare trust a mismatch waiting to be queried.

Pro Tax Tips

• Treat any pre-2026 advice that a bare trust has no filing obligation as spent. It was correct when given. It no longer describes the position for taxation years ending on or after December 31, 2026.
• Document the arrangement now rather than in response to a CRA enquiry. A declaration of bare trust executed today, dated as of the date the arrangement began, is the ordinary and proper way to record a relationship that already exists.
• Assemble the blockchain evidence alongside the declaration. Wallet addresses, funding source, exchange records and the instruction history between the parties are contemporaneous and more persuasive than any document drafted later.
• Expect the platform data to arrive before you do. Once the Crypto-Asset Reporting Framework applies, as proposed from the 2027 calendar year, the CRA will receive information on the account holder. Where the account is in the bare trustee’s name and the income is reported by the beneficiary, be in a position to explain the difference on request.
• Confirm the arrangement actually qualifies before relying on it. A transfer intended as a bare trust that fails the agency and certainty tests is a disposition at fair market value, and on an appreciated position that is an expensive failure.
• Do not assume the usual treatment is universal. Cheema is the standing reminder that a bare trustee is not always ignored.

Frequently Asked Questions

Does a bare trust holding cryptocurrency have to file a T3 return?

For taxation years ending on or after December 31, 2026, certain bare trusts must file a T3 return including Schedule 15. Before that, no filing was required for 2023, 2024 or 2025. The earlier position that a bare trust never files is no longer accurate.

Did the rules not get cancelled in 2024?

The 2023 requirement was waived, and the original rule was then repealed retroactively, so nothing was required for 2024 or 2025 either. The obligation that takes effect for 2026 is a new one under a different provision.

Does transferring crypto to a bare trustee trigger capital gains tax?

No, provided the arrangement is genuinely a bare trust. Subsection 104(1) of the Income Tax Act means the transfer is not a disposition. If the arrangement fails to qualify, the transfer is a disposition at fair market value.

Who reports the income, the bare trustee or the beneficiary?

The beneficiary. The bare trustee is ignored for income tax purposes, and a sale directed by the beneficiary is taxed as though the beneficiary dealt with the purchaser directly.

Who files the T1135, the bare trustee or the beneficiary?

The beneficiary, where his or her total cost for specified foreign property exceeds $100,000 at any point in the year. The bare trustee holds only vacuous legal title, whose cost should be nominal, so the bare trustee will rarely meet the threshold.

Is cryptocurrency specified foreign property?

Generally yes. Cryptocurrency, NFTs and other blockchain assets are intangible property and, existing on decentralized platforms, are generally situated, deposited or held outside Canada. Property held exclusively in the course of carrying on an active business, including inventory, is excluded.

Does a bare trust protect me from the Crypto-Asset Reporting Framework?

No. Under the proposed framework, crypto-asset service providers will report information about their Canadian users to the CRA. The platform will report on the account holder regardless of the beneficial ownership behind the account.

Do I need a written bare trust agreement?

No. A bare trust arises on the facts and exists whether or not anyone documented it. A written declaration is evidence of the relationship, not its source, and the CRA will frequently dispute a bare trust where nothing is in writing.

Can I sign a declaration now for an arrangement that started years ago?

Yes. A declaration executed today, bearing its true execution date and expressed to be made as of the date the arrangement began, is ordinary practice and is accepted. What is improper is a false execution date, or an honest date attached to a recital asserting something that was not true earlier.

How do I know whether my arrangement is a bare trust?

It requires the three certainties and the agency indicia, and where nothing was written the parties’ conduct decides it. The central question is whether the person holding the assets deals with them only on the beneficiary’s direction, and takes no personal benefit from them.

I hold a friend’s crypto in my wallet. What are my obligations?

You may be a bare trustee, in which case the income is your friend’s to report rather than yours. Note also that being ignored for income tax purposes does not make a bare trustee invisible for every purpose: see our analysis of derivative tax liability under section 160. You may nonetheless be within the 2026 T3 filing obligation, and the platform is expected to report your account under CARF once it applies. The arrangement should be documented.

Can I use a bare trust with a crypto trading corporation?

Yes, and it remains a useful arrangement. After a section 85 rollover the owner may hold legal title to the wallets for the corporation’s benefit, and the corporation is treated as dealing with the assets directly. The filing obligations above still have to be addressed.

DISCLAIMER: This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out-of-date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.