How are XRP yield, lending income, AMM fees and airdrops taxed?

The full answer

Both agencies tax some crypto receipts as income at the moment the holder can use them, separately from any gain or loss on a later sale. The clearest rules cover staking rewards and airdrops. No ruling of their own was found for lending returns or AMM fees in Canada or the US, and the IRS has said in writing that its listing of some of them for reporting relief implies no view on their tax treatment. This page gives general information, not tax advice. The CRA and IRS pages linked here, or a tax professional, have the final word for your own return.

How does the IRS treat airdropped tokens?

IRS Revenue Ruling 2019-24 deals with airdrops that follow a hard fork. It holds that a taxpayer “has gross income, ordinary in character” from an airdrop of a new cryptocurrency following a hard fork if the taxpayer receives units of it, and its example measures the income at fair market value when the airdrop is recorded on the ledger.[1] The ruling also says that if the tokens land at an exchange that does not support them and does not credit them, the holder has not yet received them; receipt happens when the holder later gains the ability to “transfer, sell, exchange, or otherwise dispose of” them.[1] The ruling covers airdrops that follow a hard fork. No IRS or CRA ruling found on September 29, 2026 deals with other kinds, such as unsolicited tokens sent to XRP Ledger addresses. What those tokens are and why they appear is on strange tokens and airdrops in your wallet.

How are rewards and staking-type yield taxed?

For staking, IRS Revenue Ruling 2023-14 says that for a cash-method taxpayer, the fair market value of the validation rewards received “is included in the taxpayer’s gross income in the taxable year in which the taxpayer gains dominion and control over the validation rewards.”[2] The IRS FAQ adds that for digital assets received for services, the dollar value when received is ordinary income and also becomes the holder’s basis.[3] That basis is what the later sale is measured against.

In Canada, the CRA says staking rewards on a centralized exchange platform are generally income “at the time the rewards are credited to the taxpayer’s wallet on the platform.”[7] The CRA also says crypto income “may be considered business income” when the activities are consistent with carrying on a business, a question it says “must be determined on a case-by-case basis.”[8] When a later sale is on capital account, half of the capital gain is included in income.[8] What XRP yield products exist, and their risks, is on can I earn yield on XRP.

What about lending income and AMM fees?

IRS Notice 2024-57 lists liquidity provider transactions, staking transactions, and transactions “described by digital asset market participants as lending of digital assets” among those that brokers are “not required to make a return on” until further guidance. It states that describing them “does not constitute or reflect a substantive analysis” and that “no inference is intended” about their tax treatment.[4] The notice deals with what brokers report; it does not say whether the holder owes tax.

The XRP Ledger’s AMM adds a further question. XRPL.org says trading fees “are paid to the AMM, not directly to liquidity providers,” who benefit because they “can redeem their LP tokens for a percentage of the AMM pool.”[9] No CRA or IRS page found on September 29, 2026 says whether a deposit into a pool, the LP tokens received, or the later withdrawal is the taxable event. In our reading, a liquidity provider has no official rule to point to for either country.

Is the “income on receipt” rule contested?

Yes, in part. In Jarrett v. United States, a Tezos staker argued that staking “uses existing Tezos tokens and computing power to produce new tokens,” so that “he owes tax on the tokens only when he sells or transfers them.”[6] The IRS issued a refund check for $4,001.83, and on August 18, 2023 the Sixth Circuit affirmed the dismissal of the case as moot, so the question was not decided.[6]

On the other side, in Paschall v. Commissioner, T.C. Memo. 2026-46, filed June 4, 2026, the US Tax Court found that staking rewards credited to an eToro account in 2021 were an accession to wealth on receipt, even though the taxpayer chose not to sell them.[5] That is a memorandum opinion. The taxpayers represented themselves, the case was submitted fully stipulated, and the IRS told the court it did “not directly rely upon” Revenue Ruling 2023-14.[5] Of the two cases cited here, only Paschall reached the merits, and neither is an appeals-court ruling on when staking income arises.

What records does this require?

Each income receipt needs its date, amount and dollar value at arrival, because that value is both the income figure and the starting cost for any later sale. For AMM positions, recording the deposit, the LP tokens received and the withdrawal keeps every possible tax treatment open. The full record list is on what records to keep for crypto taxes, and reporting of foreign-held XRP is on foreign reporting for XRP holdings.