FASB Sets Three Tests for Stablecoins to Qualify as Cash

The Financial Accounting Standards Board proposed new U.S. accounting guidance on Aug. 18 that would clarify when companies may present certain stablecoins as cash equivalents.

The proposed Accounting Standards Update adds examples to Topic 230, Statement of Cash Flows. It does not change the existing definition of cash equivalents under generally accepted accounting principles. FASB opened the proposal for public comment through Nov. 19. The board will decide whether to issue a final standard and set its effective date after reviewing responses.

A digital asset qualifies only if its holder has an on-demand contractual right to redeem it directly with the issuer for a known cash amount. The issuer must also hold one-to-one reserves in segregated accounts. Those reserves must consist of short-term, highly liquid assets that are readily convertible into known cash amounts. Meeting those conditions does not force a company to classify the token as a cash equivalent. Companies retain the option to use that presentation and must consider applicable laws and regulations.

The proposal is not final guidance. FASB said the examples are intended to “promote more consistent application” after stakeholders reported uncertainty and different accounting treatments during its 2025 agenda consultation.

One proposed example examines a token that trades actively on secondary markets without giving the holder a direct right to redeem with its issuer. FASB concluded that market liquidity alone would not satisfy the existing cash equivalent definition. A liquid exchange market can allow a company to sell a token quickly. Its market price can move away from the promised value during periods of stress. Direct redemption provides a separate contractual route to receive a known cash amount.

Another example rejects cash equivalent treatment when reserves include crypto assets and gold. FASB said price changes in those assets could prevent the holder from receiving a known cash amount. These examples would exclude algorithmic tokens, overcollateralized crypto-backed products and other assets without direct issuer redemption, even when they use the stablecoin label.

FASB began the project because companies reached different conclusions under existing GAAP. Some public companies already classify selected payment stablecoins as cash equivalents based on their redemption and reserve arrangements. Coinbase voluntarily changed its accounting method effective Dec. 31, 2025. Its SEC filing says USDC, EURC and PYUSD are redeemable one to one and backed by cash equivalents in segregated accounts. The company applied the change retrospectively. Coinbase said it did not alter previously reported assets, liabilities, equity, net income or earnings per share, although it changed portions of its cash flow presentation.

A final FASB standard could make those assessments more comparable across U.S. companies. It would not determine whether an issuer may legally offer a token or whether reserves comply with federal rules. The accounting proposal arrives as agencies implement the GENIUS Act, which created the first federal framework for U.S. payment stablecoins. That law established new federal payment rules covering licensing, reserves, redemption and disclosures. It generally takes effect in January 2027. Regulators have continued developing its operating requirements after missing the original rulemaking deadline.

The Treasury Department also recently opened consultation on when tokens are issued, offered or sold in the United States. FASB’s process remains separate from those regulatory proceedings. A token could satisfy federal issuance rules but still fail the accounting test if a particular holder lacks direct redemption rights or the reserves contain volatile assets.

The proposal would also require every entity reporting cash equivalents to disclose their major components and corresponding amounts. That requirement would apply even when no digital assets are included.

Stakeholders may submit written responses until Nov. 19. FASB will then consider revisions, decide whether to adopt the update and determine when companies must begin applying it.