Ondo Finance's USDY (US Dollar Yield) is one of the most widely held tokenized RWAs on Solana. It represents a tokenized claim on a portfolio of short-term US treasury bonds and bank demand deposits, offering holders stable yield denominated in US dollars. As of early 2026, USDY has crossed $500M in total value locked — making it the single largest RWA token on Solana by TVL.
But here's what many holders overlook: USDY generates yield, and yield is taxable income. Unlike a stablecoin that simply tracks $1.00, USDY's price appreciates over time as the underlying treasury portfolio earns interest. That appreciation isn't just unrealized gain — in most jurisdictions, it's assessable income in the period it accrues. If you're holding USDY without tracking the tax implications, you're building a liability you can't see.
How USDY Yield Works
USDY is a rebasing-style yield token, but with a key difference from typical DeFi yield. The underlying assets are real US treasury bonds and bank deposits managed by Ondo Finance. The yield comes from the interest those instruments earn — currently in the 4-5% APY range, tracking the federal funds rate.
Rather than distributing interest payments to holders, USDY's price increases over time. If you buy 100 USDY at $1.02 and hold for a year at 4.5% APY, your tokens are now worth approximately $1.066 each. Your token balance doesn't change — the value per token does. This is economically equivalent to receiving interest, just expressed differently on-chain.
This mechanism matters for tax purposes because the yield accrues continuously. There's no discrete "payment event" like a bond coupon or stock dividend. The value simply grows, and you need to track the accrual for your tax filings.
Ondo also offers OUSG (Ondo Short-Term US Government Bond Fund), which works similarly but targets institutional investors with higher minimums. The tax treatment is essentially the same — yield from underlying US government securities, accruing through token price appreciation.
Is USDY Yield Taxable?
Yes, in every jurisdiction we cover. The specific treatment varies, but the core principle is consistent: yield from tokenized treasury bonds is treated as interest income, not capital gains. This distinction matters because interest income is typically taxed at your marginal income tax rate — often higher than capital gains rates.
The fact that the yield accrues through price appreciation rather than discrete payments doesn't change its character. Tax authorities look at the economic substance, not the on-chain mechanism. USDY represents a claim on interest-bearing instruments, so the return is interest income regardless of how it's expressed on the blockchain.
This is where USDY diverges from simply holding SOL or a meme coin. If you buy SOL at $100 and it goes to $150, that $50 is an unrealized capital gain — not taxable until you sell. But if your USDY appreciates from $1.02 to $1.07 due to treasury yield, that $0.05 per token may be assessable as accrued interest income even if you haven't sold.
United States: Interest Income + Potential OID Rules
For US taxpayers, USDY yield is generally treated as interest income, taxable at your ordinary income tax rate (10-37% depending on bracket). It's reported on Schedule B of your Form 1040 if your total interest income exceeds $1,500.
There's a nuance here: because USDY doesn't make periodic cash payments, the IRS may treat it under Original Issue Discount (OID) rules. OID requires you to accrue and report interest income annually, even if you haven't received any cash. This means you may owe tax on USDY yield in the year it accrues, not just when you sell or redeem.
When you eventually sell or redeem USDY, your cost basis should include previously accrued OID — meaning you won't be double-taxed on the yield you've already reported. But this requires careful tracking of your accrual amounts year by year.
If you hold USDY through a tax year boundary (December 31), you'll need to calculate the yield that accrued during that calendar year and report it as interest income. The per-token price at January 1 vs December 31 gives you the annual yield to report.
Capital gains or losses on USDY only arise if the market price diverges from the accrued value — for example, if you sell during a temporary depeg event. In normal conditions, selling USDY after accounting for accrued interest should result in minimal capital gain or loss.
Australia: Interest Income in the Financial Year
The ATO treats yield from tokenized treasury products as interest income, assessable at your marginal tax rate (0-45% plus Medicare levy). The critical detail for Australian holders: your tax year runs July 1 to June 30, not January to December.
This means you need to calculate USDY yield accrued between July 1 and June 30, not the calendar year. If you bought USDY in March, your first tax year only covers March through June — a partial year of accrual.
Australian residents also need to consider the foreign income implications. USDY's underlying assets are US-denominated instruments. The yield is foreign-source income, and while there's no withholding tax on the token itself, you may need to report it on your foreign income schedule.
The 50% CGT discount does NOT apply to interest income. This is a common misconception. The discount only applies to capital gains on assets held for more than 12 months. Since USDY yield is classified as interest, not capital gains, it's taxed at your full marginal rate regardless of holding period.
United Kingdom: Savings Income Rules
HMRC classifies yield from tokenized treasury products as savings income. This falls under the Personal Savings Allowance (PSA): basic rate taxpayers can earn up to £1,000 in savings income tax-free, while higher rate taxpayers get a £500 allowance. Additional rate taxpayers get no PSA.
Beyond the PSA, savings income is taxed at 20% (basic), 40% (higher), or 45% (additional rate). The UK tax year runs April 6 to April 5, so you need to calculate USDY accrual within that window.
For UK holders, there's a potential advantage: if your total savings income (including USDY yield, bank interest, and other fixed-income returns) stays under the PSA threshold, the yield may be effectively tax-free. But this only applies if USDY is your only or primary savings income source.
Self-assessment filing deadline is January 31 following the end of the tax year. So for the 2025-26 tax year (April 6, 2025 to April 5, 2026), your filing deadline is January 31, 2027.
Canada: Foreign Interest Income
The CRA treats USDY yield as interest income from a foreign source, fully taxable at your marginal rate. Unlike Canadian-source eligible dividends, there's no dividend tax credit available for USDY yield — it's straight interest income.
Canadian holders should be aware of the T1135 (Foreign Income Verification Statement) requirement. If your total cost of specified foreign property exceeds CAD $100,000 at any point during the year, you must file T1135. USDY counts as specified foreign property because it represents a claim on US-based instruments.
Interest income must be reported on an accrual basis in Canada, not just when realized. This means you need to calculate and report the USDY yield that accrued during each calendar year (January 1 to December 31), even if you didn't sell or redeem any tokens.
The superficial loss rule may apply if you sell USDY at a loss and repurchase within 30 days. However, since USDY is a yield-bearing instrument that typically only appreciates, this scenario is uncommon.
Ondo Global Markets: Equities and ETFs
Beyond USDY and OUSG, Ondo has expanded into tokenized equities and ETFs through Ondo Global Markets. These include tokenized versions of Amazon, Microsoft, Adobe, Nike, PayPal, and several ETFs including the S&P 500 (IVV) and international markets (IEFA).
The tax treatment for these tokens differs from USDY. Tokenized equities generate capital gains or losses on disposal, not interest income. Dividends from the underlying stocks are treated as dividend income — qualified or ordinary depending on your jurisdiction and the holding period.
If you hold a mix of USDY (yield-bearing) and Ondo equities (capital-gains-oriented), you need to track them separately. The income types are different, the tax rates may be different, and the reporting requirements are different. This is exactly the kind of complexity that a purpose-built RWA tool handles and a generic crypto tracker doesn't.
How to Track USDY for Tax Purposes
Proper USDY tax tracking requires three things: recording your acquisition cost (including the per-token price at purchase), tracking the yield accrual over each tax period, and calculating any capital gain or loss on disposal.
SolanaRWA handles this automatically. When you scan your wallet, it detects USDY holdings and pulls your acquisition details from on-chain transaction history. The auto-valuation feature fetches current USDY pricing, and the income tracking system lets you record accrued yield per tax period. When you generate a tax report, the yield is categorized correctly as interest income — not lumped in with your crypto trading gains.
For holders in jurisdictions with non-calendar tax years (Australia: Jul-Jun, UK: Apr-Apr), the dashboard adjusts automatically when you select your region. You see yield accrued within YOUR tax year, not just the calendar year.
The bottom line: USDY is one of the best yield-bearing instruments on Solana, but it requires proper tax tracking. The yield is real, the obligations are real, and the penalties for getting it wrong are real. Track it from day one — don't wait until tax season to figure out what you owe.
Disclaimer: This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.