U.S. Accounting Board Proposes Treating Some Stablecoins as Cash Equivalents

The U.S. Financial Accounting Standards Board (FASB) has proposed allowing certain stablecoins to qualify as cash equivalents under generally accepted accounting principles (GAAP), potentially giving companies clearer guidance on how to account for the digital assets.

Under the proposal, stablecoins could meet the definition of cash equivalents if they are backed by liquid reserves equal to or greater than the value of tokens in circulation and can be redeemed for U.S. dollars on demand.

The proposal comes as companies and accountants face uncertainty over whether certain stablecoins should receive the same accounting treatment as other highly liquid assets.

Stablecoin Criteria

FASB's proposed amendments would clarify how the existing definition of cash equivalents applies to certain digital assets through illustrative examples.

To qualify, a stablecoin would need to have liquid reserves at least equal to the tokens outstanding, with the composition of those reserves disclosed annually. The tokens would also need to be redeemable for dollars at the holder's discretion.

The proposed treatment could place qualifying stablecoins alongside assets such as U.S. Treasury securities, commercial paper and money market funds under U.S. GAAP.

Addressing Accounting Uncertainty

FASB said the amendments are intended to address differences in how stablecoins may be classified under current accounting practices.

The board noted that the absence of specific guidance can result in different accounting outcomes depending on the information or sources used to assess a digital asset's characteristics.

The proposal would therefore provide illustrative examples rather than establish an entirely new definition of cash equivalents specifically for stablecoins.

Proposal Open for Public Comment

The proposal forms part of FASB's broader work on accounting for crypto assets, which began with the development of dedicated guidance in 2023.

The latest draft is not yet an accounting requirement. FASB is accepting public comments on the proposed amendments until November 19 before considering whether to finalize the changes.