The Financial Accounting Standards Board (FASB), which sets US accounting standards, released a proposed accounting standards update on August 18 local time containing examples for determining which stablecoins qualify as cash equivalents. Its formal title is "Statement of Cash Flows (Topic 230): Cash Equivalents: Disclosure Enhancement and Evaluation of Certain Digital Assets," and its release was approved unanimously by the seven board members, with comments accepted through November 19. The proposal does not change the definition of cash equivalents itself, opting instead to use examples to show how the existing definition applies to digital assets. The examples cite three attributes: a contractual right to redeem for cash on demand, a direct right of redemption against the issuer and redemption for a set amount of cash, and short-term, highly liquid reserve assets held by the issuer in a segregated account at a minimum of one-to-one against the amount in circulation. What emerges more clearly from the examples is what is excluded. If a holder has no contractual right to demand redemption directly from the issuer and can only sell at around one dollar in the secondary market, the proposal takes the view that it does not qualify as a cash equivalent. Fetching full value in the market and holding a right to demand redemption from the issuer are different things. Even if reserve assets are held one-to-one against the amount in circulation, they likewise do not qualify if those reserve assets are virtual assets or gold. That is because their value moves for reasons other than interest rate changes, making it hard to view the risk of changes in value as small. Enhanced disclosure is a separate axis. The proposal would require all companies that present cash equivalents to disclose in their annual reports the major components, such as US Treasuries, commercial paper, stablecoins and money market funds (MMFs), along with the amount of each item, and this obligation applies even to companies that do not hold digital assets. Meeting the requirements does not mean an asset must be presented as a cash equivalent; the company decides as a matter of accounting policy. The proposal says that relevant laws and regulations should be considered in setting that policy, citing the GENIUS Act as an example, and it is also asking for comment on whether this language is appropriate. The effective date will be set after the comment process.
FASB Proposes Examples for Determining Whether Stablecoins Qualify as Cash Equivalents, Plus Stronger Disclosure
Metanomia View
If stablecoins that meet the requirements can be presented as cash equivalents, there is greater room for on-chain dollars to be absorbed into corporate working capital and payment and settlement assets. That said, this proposal draws boundaries more than it widens the door. Assets can be excluded if there is no direct right of redemption against the issuer or if the reserve assets are not composed of short-term, highly liquid assets, which means recognition of liquidity for accounting purposes rests on the quality of the reserve assets and the legal certainty of the redemption right. Korea, too, needs to spell out not only issuance licensing but also the criteria for classification, disclosure and audit judgment when companies hold these assets.
Sources
- Proposed Accounting Standards Update—Statement of Cash Flows (Topic 230): Cash Equivalents—Disclosure Enhancement and Evaluation of Certain Digital Assets
- Cash Equivalents—Disclosure Enhancement and Classification of Certain Digital Assets
- U.S. accounting-standards group proposes way to see stablecoins as 'cash equivalent'