FASB proposes criteria to treat some stablecoins as cash

The Financial Accounting Standards Board on Tuesday proposed guidance that would clarify when companies can classify certain stablecoins as cash equivalents under U.S. generally accepted accounting principles.

The proposed Accounting Standards Update would add illustrative examples to the existing definition of cash equivalents while leaving the formal definition unchanged. The examples aim to reduce inconsistent accounting for digital assets such as stablecoins.

Under the proposal, a token would qualify as a cash equivalent only if it provides an on-demand contractual redemption right that lets the holder redeem directly with the issuer for a known amount of cash. The token would also need a direct issuer redemption right rather than relying solely on secondary market prices. Reserves backing the token would have to be held one-to-one and segregated in short-term, highly liquid assets.

The board included examples to clarify borderline cases. An active secondary market alone would not make a token a cash equivalent if the holder lacks a contractual redemption right with the issuer. Tokens backed by reserves that include other crypto assets or gold would be disqualified because those reserve mixes introduce valuation risk.

Companies would retain the option to present qualifying stablecoins as cash equivalents; the proposal would not require a specific classification. Entities must also consider applicable laws and regulations when deciding whether to report a qualifying digital asset as cash or a cash equivalent.

FASB is accepting public comments on the proposed Accounting Standards Update through Nov. 19 and will set an effective date after reviewing stakeholder feedback. The board added the illustrative examples to promote more consistent accounting treatment across companies that hold certain stablecoins.