Aerodrome Aero Migration Tax: Is the VELO and veNFT Swap Taxable?
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Book a free exploratory callAero went live at 8:00 PM EDT on 21 October 2026 (00:00 UTC on 22 October). It merged Aerodrome and Velodrome, switched off legacy pool rewards and opened an upgrade portal that Aero's upgrade hub says has no deadline and "cannot be reversed." That turns the Aerodrome Aero migration tax question into a 2026 problem for every holder. Each upgrade takes VELO on OP Mainnet and delivers AERO on Base, and most tax software reads those as two unrelated events.
I'm Chris Herbst, Managing Director at CountDeFi, a global crypto tax reporting firm specializing in complex cryptocurrency and DeFi reconciliations. I am a Chartered Business Accountant in Practice, CBAP (CIBA), with the Chartered Institute for Business Accountants, and a General Tax Practitioner, GTP (SAIT), with the South African Institute of Taxation. Since 2017 our team has rebuilt cost basis through token migrations, vote-escrow locks, bridges and liquidity pool histories for DeFi clients across multiple chains.
This guide is for you if you held AERO, VELO, veAERO, veVELO or an Aerodrome or Velodrome LP position when Aero launched, whether in your own wallet or on an exchange.
What Happened to AERO, VELO and veNFTs When Aerodrome Became Aero?
When Aero launched, three upgrades opened: old AERO to new AERO at 1 to 1, VELO to new AERO at 1 VELO to 0.044 AERO, and veAERO and veVELO locks to a new staked NFT called sAERO. The hub says the rate is "calculated based on projected supplies." Aero's launch post says the new supply is split 94.5% to the Aerodrome community and 5.5% to the Velodrome community, based on each protocol's share of revenue in the 52 weeks before the merger was announced. VELO has to be on OP Mainnet before it can be upgraded, and the new AERO arrives on Base.
What changed for veAERO and veVELO locks?
Each veNFT ID is retired and a new sAERO ID is issued. Remaining lock time carries over, rounded up to the next full week, and permanent locks become sAERO at the Maximum Stake Duration. Any reward you didn't claim before upgrading cannot be recovered. Aero's economics page describes the new position as an NFT "that can be traded or transferred at any time."
What changed for liquidity providers?
Upgrading a token does not move the LP position that holds it, as DeFi Prime's migration guide explains, so LPs have to withdraw from the old pool and redeposit into an Aero pool. Legacy emissions ended and all legacy gauges were switched off at launch.
Is Converting VELO to AERO in the Aero Migration a Taxable Event?
Under current US rules, converting VELO to new AERO at 0.044 is very likely a taxable exchange of one digital asset for another. Your capital gain or loss is the fair market value of the AERO you receive minus your VELO basis. The IRS digital asset FAQs (Q64) say that exchanging for digital assets that "differ materially in kind or extent" generally produces capital gain or loss. Treasury Regulation Section 1.1001-7(b)(1)(iii)(C) sets the amount realized on such an exchange at the fair market value of what you receive, and the rule applies to dispositions on or after January 1, 2025. No published IRS guidance addresses token mergers, so this is a reasoned position rather than a ruled one. The general rule is covered in our crypto-to-crypto swap guide.
Why is the taxable-swap position the strongest?
VELO and new AERO come from different token systems, live on different chains and convert at a ratio other than 1 to 1. A VELO holder gives up a full claim on Velodrome for a slice of a combined supply. Chief Counsel Advice 202316008 applied Cottage Savings, 499 U.S. 554 (1991), which asks whether two properties "embody legally distinct entitlements." It found no realization under Sections 1001 and 61(a) where the taxpayer "continues to hold the same 10 units." A VELO holder hands over VELO and gets a different token back, which is the opposite fact pattern. The memo also says it "should not be used or cited as precedent."
Is there a carryover argument?
There is. The protocol imposed the conversion, the economic interest continues in the merged protocol, and anyone who doesn't convert is stranded. The weakness is that the corporate reorganization rules cover corporate stock, and no published IRS guidance extends them to tokens. Section 602(8) of H.R. 10357, introduced 14 September 2026, says Treasury "should strongly consider" clarifying when forks and staking pool token exchanges are realization events. It is a sense-of-Congress provision only. Our tax reform overview follows the bill.
How do you calculate gain or loss at 0.044?
Here's an example. You upgrade 10,000 VELO with a $1,500 basis and receive 440 AERO. CoinPaprika reported AERO at $0.82 on 22 October, so your proceeds are $360.80 and your capital loss is $1,139.20. FAQ Q72 sets your new AERO basis at fair market value, which here is $360.80. Under FAQ Q74, your holding period "begins the day after" you receive the AERO.
Is the Old AERO to New AERO 1:1 Upgrade Taxable?
No IRS guidance covers the 1:1 upgrade from old AERO to new AERO, and you can defend either a non-taxable rebrand position or a taxable exchange position. If the value going in equals the value coming out, your gain or loss is the same either way. What the choice decides is whether that gain or loss is realized in 2026 and whether long-term AERO becomes short-term.
What supports the rebrand view?
The ticker, the ratio and the economic exposure all stay the same. Practitioners on the Koinly forum took this view of MATIC to POL, and a Hashbasis commentary called the Aero upgrade "analogous to a stock split."
What supports the exchange view?
You surrender your units to a new contract. The new token comes with real-time revenue for stakers, runs on seven chains, and dilutes the Aerodrome community from 100% of supply to 94.5%. When MATIC moved to POL, Coinbase's help page warned the conversion "could be treated as a taxable exchange." Our Augur REP migration guide works through a similar contract swap.
Is Upgrading veAERO or veVELO to sAERO Taxable?
No tax authority has addressed vote-escrow NFTs. Whether the sAERO upgrade is taxable depends on how you treated the original lock and on whether you see sAERO as a new asset.
Was the original lock a disposal?
No US guidance covers vote-escrow locks. In the UK, HMRC's CRYPTO61620 says a staking or lending arrangement where beneficial ownership passes "will give rise to a disposal," so the answer depends on the lock's terms.
Is sAERO a new asset or the same tokens?
If you treat the veNFT as see-through, the upgrade falls back into the AERO or VELO analysis above, and a veVELO upgrade brings the 0.044 swap with it. If you treat the veNFT as property in its own right, retiring the old ID for a new sAERO with different terms is an NFT-for-NFT exchange.
How do you value sAERO?
You can't just multiply the units by the AERO price. Aero's economics article refers to times "when sAERO trades below the AERO inside it," and TokenPost reports that converted permanent locks cannot be unstaked before they expire. Under Treasury Regulation Section 1.1001-7(b)(4), when the value of what you receive "cannot be determined with reasonable accuracy," you value it by reference to what you gave up. But the veNFT has no reliable price either. No published guidance sets a discount for locked tokens, so record your method. See our NFT and staking guide.
How Does Each Aerodrome Aero Migration Tax Step Compare?
The steps of the Aero migration carry very different levels of US tax certainty. Paying ETH gas is a settled disposal, while the veNFT-to-sAERO upgrade has no guidance at all.
| Migration step | US treatment | Basis or price issue |
|---|---|---|
| VELO to new AERO at 0.044 | Likely taxable swap | No reliable conversion price |
| Old AERO to new AERO 1:1 | No guidance | Holding period may restart |
| veAERO or veVELO to sAERO | No guidance | sAERO can trade at a discount |
| LP withdraw and redeposit | Possible two disposals | Rebuild from chain data |
| Rewards claimed before upgrade | Income by analogy | Value at claim time |
| Unclaimed rewards forfeited | Likely no income | No basis to deduct |
| Gas paid in ETH | Disposal of ETH | Small gain or loss |
| MATIC to POL (closest precedent) | Practitioners split | Same 1:1 debate |
What price do you use when new AERO had no feed?
Use a timestamped market price for the moment you converted, and keep a record of where it came from. A DefiLlama pull request says new AERO "has no DefiLlama price yet" and borrowed the old token's CoinGecko ID as a workaround. As a cross-check, 0.044 times $0.82 implies $0.03608 per VELO. Our missing cost basis guide explains how to document a price.
Are Final Aerodrome Rewards and sAERO Revenue Taxable Income?
Rewards you claimed from Aerodrome or Velodrome before upgrading are generally ordinary income at fair market value when received. Rewards you lost by not claiming never came under your control and should not be income.
Are rewards claimed before the upgrade income?
Rev. Rul. 2023-14 says staking rewards are income in the year you gain dominion and control. In Paschall v. Commissioner, T.C. Memo. 2026-46, a non-precedential memorandum opinion, the Tax Court held rewards includible when credited. Both cover validation staking, so applying them to vote incentives is an analogy, though the closest one available.
Can you deduct rewards you forfeited?
Generally not. Forfeited rewards were never included in your income, so they have no basis to deduct.
When are sAERO revenue and LP AERO Rewards income?
sAERO holders get "a pro rata share of 100% of the exchange revenue" from the pools they back, streamed in real time. Whether that is income when it accrues or when you claim it is an open question. Each time Autopilot "convert[s]" revenue into another token, that is a potential separate disposal. LP AERO Rewards are "minted only when claimed," which supports treating them as income at claim. The Form 1099-DA instructions say "Do not report rewards and staking payments on Form 1099-DA." Our DeFi tax guide covers pool income in more detail.
Is Moving an Aerodrome or Velodrome LP Position to Aero Taxable?
Moving liquidity to an Aero pool takes a withdrawal and a new deposit, and no published IRS guidance says whether either step is a disposal. A cautious reading treats them as two disposals. Notice 2024-57 only spares brokers from filing Form 1099-DA for LP transactions. It doesn't decide how they're taxed.
What extra steps do VELO pairs add?
A VELO-pair LP withdraws, upgrades the VELO (the likely taxable swap above), bridges the new AERO back to OP Mainnet and redeposits. If you treat the bridge as a move between your own wallets, FAQ Q81 calls it "a non-taxable event, except to the extent of any digital assets you use" for fees. Our bridged assets guide sets out the competing views.
Is gas paid in ETH taxable?
Yes. Paying gas in ETH disposes of that ETH, and paying a fee in digital assets means you answer "Yes" to the Form 1040 digital asset question. The proposed $10 de minimis rule would only cover dispositions after December 31, 2027.
Will Coinbase Report the Aero Conversion on Form 1099-DA?
Coinbase's announcement of its AERO and VELO conversion, which runs 2 to 4 November 2026, does not say whether the conversion will show up as a sale on Form 1099-DA, so if you hold on Coinbase, plan for either outcome. In posts on X, Coinbase says VELO converts at "approximately 0.044 AERO per VELO," that "There will be no transaction fees associated with the conversion," and that "Trading of VELO will be disabled on November 2, 2026." Crypto Briefing dates the announcement to 1 October 2026 and notes that it mentions neither tax nor Form 1099-DA.
The Form 1099-DA instructions count a disposition "in exchange for ... different digital assets" as a sale. Brokers report basis for certain transactions on or after 1 January 2026, but AERO or VELO you bought before 2026 is noncovered. That means a sale could show proceeds in box 1f, a blank box 1g and the box 9 checkbox ticked. Our guides to reading Form 1099-DA and Coinbase tax documents walk through the layout.
What about VELO on Binance?
Reports collected on CoinMarketCap's Velodrome update page say VELO/USDT spot trading on Binance ends at 03:00 UTC on 3 November 2026. They describe a delisting, not a conversion.
How do you report it on Form 8949?
On Form 8949, use boxes G, H or I for short-term digital asset transactions and J, K or L for long-term ones, never box C or F. Use adjustment code B when box 1g of your Form 1099-DA shows the wrong basis.
How Is the Aerodrome Aero Migration Taxed Outside the US?
The UK, Canada, Australia and Germany all treat swapping one token for a different token as a disposal, and none of them has published guidance on token migrations. VELO to AERO is therefore likely a disposal in all four.
United Kingdom
CRYPTO22100 lists "exchanging tokens for a different type of token" as a disposal. CRYPTO22110 says "TCGA92/S43 applies" to one-way ledger transfers, with costs "attributed in full to the second cryptoasset." But its example is ETH moved for an equivalent amount, not a merger at 0.044. The no gain, no loss regime for liquidity pools starts on 6 April 2027, so it doesn't cover October 2026 LP withdrawals. See our guide to UK pooling across platforms.
Canada
The CRA's crypto-asset income page treats trading one crypto-asset for another as a disposition. Capital treatment is the default unless you are running a business, and the CRA administers the one-half inclusion rate. The page says nothing about DeFi, migrations or bridging.
Australia
The ATO treats a crypto-to-crypto swap as a CGT event. Your capital proceeds are the market value of what you receive, or of what you gave up if that can't be determined. Draft TD 2026/D2 (19 August 2026) treats wrapping as CGT event C2 and rejects a "change in form" view, though it does not cover migrations. A swap restarts the 12-month clock for the 50% CGT discount, and indexation replaces that discount for gains accruing from 1 July 2027.
Germany
Under the BMF letter of 6 March 2025, a Tausch counts as both a disposal and an acquisition. Blockpit's summary says the one-year period under Section 23 EStG restarts and that the letter has no explicit rule for token migrations. Reports say a 30 September 2026 draft bill would tax crypto acquired after 31 December 2026 regardless of holding period. It is not law, and ms-aktuell reports no published decision from the cabinet session planned for 14 October. If the draft passes as reported, migrating in 2026 could matter, but that is an inference from a non-final draft. See our German accountant guide.
Where Does Aerodrome Aero Migration Tax Reporting Break Down?
Aerodrome Aero migration tax reporting breaks down for three reasons: new AERO launched without a price feed, the VELO ticker collides with an unrelated token, and each upgrade splits one event across two chains and two NFT IDs. Aero's operator pages describe no CSV export, so you have to rebuild the history from chain data.
Why does software misprice AERO and VELO?
Tools that look up prices by contract address may show new AERO as unpriced. Tools that look up by ticker may stitch old and new AERO into a single price series. CoinMarketCap lists both "Velodrome Finance" and a separate "Velo (VELO)," and CoinLore's Velo (VELO) page shows a 21 October close of $0.00422, a price that belongs to a different asset.
Why does one upgrade look like two transactions?
VELO leaves your wallet on OP Mainnet, and AERO arrives on Base in a separate transaction. If nobody links the two, the inflow looks like an airdrop or income. On the veNFT side, the old ID is retired and sAERO is minted under a new one. Most tools ignore NFTs, so the basis of your locked tokens doesn't carry across.
What about lender-held and self-custody positions?
On 40Acres, the protocol upgrades veNFTs itself and holds the sAERO in a portfolio account, so nothing shows up in your own wallet. Notice 2026-20 extends identification relief through 31 December 2026, but only for units a broker holds. Self-custody units need wallet-by-wallet tracking under Rev. Proc. 2024-28. Our guide for thousands of transactions shows how we rebuild these histories.
What Are the Most Common Aerodrome Aero Migration Tax Mistakes?
The most common Aerodrome Aero migration tax mistake is letting software book the AERO arriving on Base as income while the VELO leaving OP Mainnet disappears as a transfer. That overstates your income and loses your basis.
Booking the Base inflow as income
Link the two legs as one trade, so the new AERO counts as a purchase and not income. Our Koinly review service fixes this kind of mismatch.
Using the wrong VELO price
Check every VELO valuation against 0.044 times the AERO price at that moment.
Assuming self-custody tokens convert automatically
They don't. Only exchange-held balances convert on the exchange's schedule. The hub says tokens that are never upgraded "will never reach circulation."
Do You Need Help With Your Aerodrome Aero Migration Tax Reporting?
If you held VELO, a veNFT or an LP position through the cutover, you probably need someone to link the cross-chain legs, price an unpriced token and set defensible positions before you file for 2026.
CountDeFi Is Your Aero Migration Tax Solution
We are not just accountants at CountDeFi, we are data scientists who work exclusively on crypto. We have worked with more than 1,000 clients globally since 2017, rebuilding migrations, locks and liquidity histories into reports your CPA can follow. If Aero touched your wallets, book a free call with one of CountDeFi's crypto tax specialists.
Official Resources
- IRS Frequently Asked Questions on Digital Asset Transactions The IRS answers on crypto-to-crypto exchanges, basis, holding periods and transfers between your own wallets.
- Instructions for Form 1099-DA How brokers report digital asset sales, covered status and basis, box by box.
- Instructions for Form 8949 Which boxes to use for short-term and long-term digital asset transactions, and when to use adjustment code B.
- HMRC CRYPTO22110: Transferring Tokens Between Distributed Ledgers HMRC's view on one-way ledger transfers and how allowable costs carry over.
Frequently Asked Questions
Is converting VELO to AERO in the Aero migration a taxable event?
Under current US rules it is very likely taxable. VELO and new AERO are different assets on different chains, exchanged at 0.044, which fits the IRS rule that swapping for an asset that differs materially produces capital gain or loss.
Is the old AERO to new AERO 1:1 swap taxable?
No IRS guidance answers this. One view treats the 1:1 AERO upgrade as a non-taxable rebrand. The other treats it as an exchange, because you surrender your units to a new contract that carries different rights.
What is my cost basis in new AERO after migrating VELO?
Under the taxable-swap position, your basis in new AERO is its fair market value when you received it, per IRS FAQ Q72. Your old VELO basis is used up in working out the gain or loss on the swap.
How do I calculate gain or loss on VELO converted at 0.044 AERO?
Multiply your VELO by 0.044, value the resulting AERO at the time you converted, and subtract your VELO basis. For example, 10,000 VELO becomes 440 AERO, which at $0.82 gives $360.80 of proceeds.
What price do I use for new AERO on October 22, 2026 for taxes?
Use a timestamped price for the moment you converted and keep the source. CoinPaprika reported AERO at $0.82 on 22 October 2026, and if new AERO can't be valued reliably, Treasury Regulation Section 1.1001-7(b)(4) points you to the value of what you gave up.
Is upgrading veAERO to sAERO a taxable event?
No tax authority has addressed it. If you treat the veAERO as see-through, it follows the 1:1 AERO analysis. If you treat it as its own property, swapping it for a new sAERO NFT is an NFT-for-NFT exchange.
Is converting veVELO to sAERO taxable?
The underlying swap is likely taxable, because the locked VELO converts at 0.044 into AERO inside the new sAERO. Whether the NFT layer is a second exchange is unsettled.
Does my holding period reset when I migrate to Aero?
For a taxable swap it does. IRS FAQ Q74 starts the holding period the day after you receive the new AERO. If you take the rebrand position on the 1:1 AERO upgrade, you would keep your original holding period.
Can I claim a capital loss on VELO by migrating to AERO in 2026?
Under the taxable-swap position you can. Converting VELO worth less than your basis realizes a capital loss in the year you convert.
How is the Aero migration different from the MATIC to POL migration for taxes?
MATIC to POL was a 1:1 conversion inside one project, much like the old AERO upgrade. VELO to AERO adds a ratio other than 1 to 1, a different protocol's token and a move across chains, which makes a taxable exchange more likely.
Coinbase converted my VELO to AERO, will I get a 1099-DA for it?
Coinbase's conversion announcement doesn't say. The Form 1099-DA instructions treat exchanging one digital asset for a different one as a sale, so the conversion may appear on the form, probably without basis if you bought before 2026.
Why does my 1099-DA show AERO proceeds with no cost basis?
AERO or VELO bought before 2026 is noncovered, so a broker can report proceeds in box 1f, leave box 1g blank and tick box 9. You supply the basis yourself on Form 8949.
How do I report the Aero migration on Form 8949?
Report a taxable Aero conversion in box G, H or I if short-term, or J, K or L if long-term, never box C or F. Use adjustment code B if the basis on your Form 1099-DA is wrong.
Do I answer yes to the digital asset question on Form 1040 if I only migrated AERO?
Answer yes if you treat the AERO migration as an exchange, received rewards, or paid gas in ETH. The IRS allows "No" only for moves between your own wallets where you paid no fee in digital assets.
Are my last Aerodrome voting rewards taxable income?
They are generally income at fair market value when you claimed them, by analogy to Rev. Rul. 2023-14 and Paschall. Both of those address validation staking, not vote incentives.
I didn't claim my veNFT rewards before upgrading to sAERO and lost them, can I deduct that?
Generally not. Unclaimed veNFT rewards were never under your control and never counted as income, so they have no basis to deduct.
Are sAERO exchange revenue payments taxable when they accrue or when I claim?
That's unsettled. Aero streams sAERO revenue in real time, and no IRS guidance says whether streamed revenue is income when it accrues or when you claim it, so pick one method and use it consistently.
Are AERO rewards for LPs taxable when they're minted or when I claim them?
Aero says LP AERO Rewards are "minted only when claimed," which supports treating them as income at claim. No IRS guidance addresses this mechanism directly.
Is withdrawing my Aerodrome LP to move it to Aero pools taxable?
No IRS guidance settles it, and a cautious reading treats the withdrawal and the redeposit as two disposals. Notice 2024-57 only changes what brokers have to report.
Is bridging AERO from Base to OP Mainnet a taxable event?
No published IRS guidance addresses bridging. If you treat it as a transfer between your own wallets, IRS FAQ Q81 makes it non-taxable except for the assets you spend on fees.
How do I value sAERO if it trades at a discount to AERO?
Value sAERO at what it would actually sell for, not units times the AERO price. Aero itself refers to sAERO trading "below the AERO inside it," and no guidance sets a discount, so document your method.
What happens to my taxes if I never migrate my VELO?
Holding unmigrated VELO triggers nothing until you dispose of it. Aero says tokens that are never upgraded "will never reach circulation," and no published guidance says whether that VELO can be written off as worthless.
Why does my tax software show VELO at $0.00422?
That matches CoinLore's 21 October close for a separate token listed as Velo (VELO), not Velodrome's VELO. Velodrome's VELO converts at 0.044 AERO, which works out to $0.03608 at an AERO price of $0.82.
My veNFT was on 40Acres and they upgraded it for me, what transactions do I report?
40Acres upgrades veNFTs itself and holds the sAERO in a portfolio account, so your wallet shows no upgrade transaction. Take the upgrade date from 40Acres and apply the same position you would have taken if you had upgraded yourself.
Do I pay tax on gas fees paid in ETH to migrate Aerodrome tokens?
Spending ETH on Aerodrome migration gas is a disposal of that ETH, with its own small gain or loss. The $10 de minimis rule proposed in H.R. 10357 would only cover dispositions after December 31, 2027.
UK: is swapping VELO for AERO a disposal for capital gains tax?
It most likely is, because HMRC's CRYPTO22100 lists exchanging tokens for a different type of token as a disposal. The alternative argument under CRYPTO22110 has not been tested for a merger at 0.044.
UK: does HMRC treat the Optimism-to-Base VELO upgrade as a one-way ledger transfer under TCGA92/S43?
HMRC applies TCGA92/S43 to one-way ledger transfers and carries costs over in full. Its example, though, is the same asset moved for an equivalent amount, and no HMRC text covers a VELO to AERO merger at 0.044.
Canada: does the CRA treat the VELO to AERO conversion as a disposition?
The CRA treats trading one crypto-asset for another as a disposition, and nothing on its crypto-asset page carves out migrations. Capital treatment applies unless you are running a business.
Australia: does the VELO to AERO swap reset my 12-month CGT discount?
It does if you treat it as a swap. A crypto-to-crypto swap is a CGT event, so the new AERO starts a fresh 12-month period for the 50% discount.
Germany: does the Aero migration restart the one-year Haltefrist?
If the Aero migration is treated as a Tausch under the BMF letter of 6 March 2025, the Haltefrist under Section 23 EStG restarts for the AERO you receive. The letter has no explicit rule for token migrations.
Germany: should I migrate VELO before 31 December 2026 because of the planned crypto tax change?
The timing could matter if the 30 September 2026 draft becomes law as reported, because AERO acquired after 31 December 2026 would then be taxed regardless of holding period. The draft is not law, so check with a German adviser before you act.
Binance delisted VELO, is the automatic conversion to AERO taxable?
Reports of the Binance VELO delisting describe trading ending, not a conversion. If Binance or any other exchange credits you new AERO for your VELO, the same likely-taxable swap analysis applies.
Chris Herbst is the founder of CountDeFi, a crypto tax specialist whose qualifications span investment management, financial analysis, mathematical statistics and computer science. He holds the Chartered Business Accountant in Practice (CBAP) designation with the Chartered Institute for Business Accountants (CIBA) and the General Tax Practitioner (GTP) designation with the South African Institute of Taxation (SAIT). His combined background in investments, accounting and tax, mathematical statistics and computer science underpins his work in complex crypto tax reporting. This article is for educational purposes only and does not constitute tax, legal or investment advice. Consult a qualified tax professional for guidance specific to your situation. View our Editorial Policy.
