Some Stablecoins Could Be Cash Equivalents on Balance Sheets in FASB Draft

The FASB, which sets U.S. accounting standards, has issued a proposal that would allow certain stablecoins to be classified as cash equivalents.

The Financial Accounting Standards Board (FASB) has prepared a new draft to resolve uncertainty regarding whether stablecoins can be treated similarly to cash in accounting records. The proposal stands out as a step that could directly affect practices under GAAP, the generally accepted accounting principles in the U.S.

According to the board’s proposal, for a stablecoin to be considered a cash equivalent, the liquid reserves backing it must be at least equal to the number of tokens in circulation. The conditions also include disclosing the content of these reserves annually and ensuring that token holders can redeem their assets for dollars at any time.

Stablecoins could be categorized among cash-like assets

In its published accounting standards update, the FASB proposed explaining through examples how the current definition of “cash equivalents” would apply to certain digital assets. This change could allow stablecoins that meet the criteria to be evaluated in the same category as highly liquid assets like Treasury bills, commercial paper, and money market funds on corporate balance sheets.

The proposal has not yet been finalized. The FASB will accept public comments on the draft until November 19. The board began its efforts to develop accounting rules specific to crypto assets in 2023. The new regulation aims to reduce disparities in accounting practices for stablecoins.