Key facts
- FASB proposed new guidance for classifying stablecoins as cash equivalents.
- Qualifying digital assets must have on-demand contractual redemption rights with the issuer.
- Assets must be redeemable for a known cash amount.
- At least one-to-one segregated reserves in short-term, highly liquid assets are required.
- Active secondary markets will not be sufficient on their own.
- Reserves including crypto assets or gold would disqualify a token.
The Financial Accounting Standards Board (FASB) has put forth proposed guidance that would establish specific conditions for classifying certain stablecoins as cash equivalents under U.S. generally accepted accounting principles. The proposal, released Tuesday, aims to address inconsistent accounting treatments for digital assets like stablecoins by adding illustrative examples to the existing definition without altering the definition itself.
Under the proposed Accounting Standards Update, a stablecoin would need to meet several criteria to be considered a cash equivalent. These include having an on-demand contractual right for redemption, the ability to redeem directly with the issuer for a predetermined cash amount, and holding segregated reserves equivalent to at least one-to-one in short-term, highly liquid assets. The FASB clarified that the mere existence of an active secondary market would not be enough if holders lack direct redemption rights with the issuer. Furthermore, reserves composed of volatile assets like cryptocurrencies or gold would disqualify a token due to valuation risks.