The Financial Accounting Standards Board (FASB) has proposed new U.S. accounting guidance that would clarify when companies may present certain stablecoins as cash equivalents. According to reports from FASB, the proposed Accounting Standards Update would add examples to Topic 230, Statement of Cash Flows, without changing the existing definition of cash equivalents under U.S. generally accepted accounting principles. The proposal opened for public comment through November 19, with FASB deciding whether to issue a final standard and set its effective date after reviewing responses. As reported by CoinDesk, the proposal is intended to clarify how the existing definition of cash equivalents applies to certain digital assets and address inconsistencies in accounting treatment. The move follows a 2025 consultation in which members raised uncertainty about treating stablecoins in the balance sheet, prompting FASB to seek to change the current definition to accommodate stablecoins and certain digital assets.
FASB has established three essential conditions for stablecoins to qualify as cash equivalents. As reported by FASB, a digital asset must provide its holder with an on-demand contractual right to redeem it for cash with direct redemption rights allowing known amounts. The issuer must also hold at least one-to-one reserves in segregated accounts consisting of short-term, highly liquid assets that are readily convertible into known cash amounts. According to FASB, meeting these conditions would not force companies to classify tokens as cash equivalents, as companies would retain the option to use that presentation while considering applicable laws and regulations. Under the proposal, stablecoins backed by highly liquid reserves, redeemable for U.S. dollars at a 1:1 ratio, and subject to annual reserve disclosures could be placed in the same accounting category as Treasury bills, commercial paper, and money market funds.
FASB has emphasized that secondary market liquidity alone cannot qualify a token when holders lack direct contractual redemption rights. According to the proposal, while a liquid exchange market can allow companies to sell tokens quickly, market prices can move away from promised values during periods of stress. FASB provided an example of a token that trades actively on secondary markets but does not provide direct redemption rights, concluding that market liquidity would not satisfy the existing cash equivalent definition. The board also rejected cash equivalent treatment when reserves include crypto assets and gold, citing price changes that could prevent holders from receiving known cash amounts. As reported by CoinDesk, the proposal would require every entity reporting cash equivalents to disclose their major components and corresponding amounts, with this requirement applying even when no digital assets are included.
FASB's proposal could signal a broader shift and accelerate stablecoin adoption, as analysts believe it may force Basel III to relax its strict capital rules against crypto assets. According to Bankless's David Hoffman, the move is big and bullish for stablecoin firms, while Austin Campbell from Zero Knowledge Group noted that it codifies corporations will be able to hold Genius stablecoins just like cash. The GENIUS Act mandates 1:1 backed stablecoins to be issued in the U.S., making them highly liquid and less risky investments deemed as cash equivalents. Currently, stablecoins like USDT and USDC on public blockchains are classified alongside Bitcoin and Ethereum and attract a 1250% risk weight, requiring banks to hold 100% 1:1 US dollar backing for every asset held, compared to zero risk weight for traditional cash and government bonds. U.S. Republican Senators, led by Cynthia Lummis, have recently called for a repeal of these capital rules, calling them punitive and a de facto ban on crypto assets.
The accounting proposal arrives as stablecoin adoption reaches unprecedented levels, with annual stablecoin transfer volume hitting a record $10.9 trillion last year and currently at $10.59 trillion with four months remaining in 2026. This growth trajectory suggests another record milestone could be achieved this year, indicating the practical need for clearer accounting guidance. The proposal would require every entity reporting cash equivalents to disclose their major components and corresponding amounts, with this requirement applying even when no digital assets are included. Stakeholders may submit written responses until November 19, with FASB considering revisions and determining the effective date for companies to begin applying the new guidance. The SEC has also unveiled Regulation Crypto Assets on August 19, providing digital asset issuers with more flexible compliance pathways, including a startup exemption allowing projects to raise up to $5 million over four years without registering under the Securities Act.
