FASB Proposal Would Clarify When Stablecoins Count as Cash Equivalents

Oct 30

4 min read

Companies that hold stablecoins for payments or treasury use may soon have clearer guidance on where those holdings belong on the balance sheet. On August 18, 2026, the Financial Accounting Standards Board issued a proposed Accounting Standards Update on cash equivalents and certain digital assets under Topic 230, Statement of Cash Flows. The proposal would do two things. It would add examples showing when a stablecoin meets the existing definition of a cash equivalent. It would also require every entity that reports cash equivalents to disclose what they consist of, whether or not it owns any digital assets. Comments are due November 19, 2026.

Why the FASB acted

Under U.S. GAAP, cash equivalents are short-term, highly liquid investments that can readily be converted to known amounts of cash and are so near maturity that interest rate changes pose little risk to their value. Generally that means original maturities of three months or less.

The board says practice has split: some entities concluded that certain stablecoins meet the definition and others concluded that they do not. Investors also asked for more transparency when stablecoins are reported as cash equivalents. The project drew on feedback from the FASB's 2025 agenda consultation and on accounting recommendations in the President's Working Group report on digital asset markets. The draft also points to the GENIUS Act, the federal framework for payment stablecoins signed into law on July 18, 2025. It cites the act as an example of a law an entity should consider in setting its cash equivalents policy.

The board chose not to rewrite the definition of cash equivalents, which it said could have unintended consequences. Instead, it would add illustrative examples.

What would qualify, and what would not

The central example involves a stablecoin pegged to $1. Under the draft, the holder could treat it as a cash equivalent if:

the holder has an on-demand contractual right to redeem each unit for $1 directly from the issuer, without significant fees or restrictions; and
the issuer holds segregated reserves of at least one-to-one against units in circulation, made up of cash and U.S. Treasury bills with original maturities of three months or less.

Two other examples fall short:

No direct redemption right. A token that holders can sell only on an active secondary market, with no direct right to redeem with the issuer, would not qualify.
Riskier reserves. A token whose reserves include crypto assets or gold would not qualify.

The board says the characteristics should be weighed together. Holding more than one-to-one in reserves would not by itself disqualify a token, but only short-term, highly liquid reserve assets count toward the one-to-one test. Classification remains a matter of accounting policy: an entity would not be required to present a qualifying digital asset as a cash equivalent. The draft does not say how stablecoins that fail the test should be accounted for.

That question connects to an earlier FASB standard. ASU 2023-08, effective for fiscal years beginning after December 15, 2024, requires fair value measurement for crypto assets within its scope. Its scope excludes assets that give holders enforceable rights to or claims on underlying goods, services or other assets. Whether a particular token falls under that standard depends on its specific terms.

A new disclosure for every company

The second part of the proposal reaches well beyond crypto. Any entity that presents cash equivalents would disclose, in annual financial statements, the significant components of those balances and their amounts. The draft's examples include Treasury bills, commercial paper, stablecoins and money market funds.

The disclosure would be annual only; interim reports would not need it.
What counts as significant is left to management's judgment.
The board considered and rejected a separate stablecoin-specific disclosure. Unlike the international standard IAS 7, the proposal would not require a reconciliation of cash components to the balance sheet.

Transition and timing

Effective date: Not yet set. The board will decide after reviewing comments. Early adoption would be permitted for financial statements not yet issued.
Stablecoin examples: Applied on a modified prospective basis from the start of the annual period of adoption, to digital assets held at that date. In the adoption year, entities would reconcile opening cash, cash equivalents and restricted cash balances before and after adoption. No preferability assessment would be required.
Component disclosure: Applied prospectively, starting at the end of the first annual period of adoption.
Private companies: The draft proposes no separate rules but asks whether entities other than public business entities need more time.

Who is affected

Businesses that accept, hold or pay in stablecoins, such as payment and e-commerce companies.
Stablecoin issuers, which, according to CBIZ, may face "increased pressure to demonstrate the quality and liquidity of reserve assets."
Every company that reports cash equivalents, including those holding money market funds, commercial paper or Treasury bills.

What to do now

Review token terms. For each stablecoin held, find out whether the company has a direct, on-demand redemption right with the issuer or relies on an exchange or other intermediary.
Get reserve information. Obtain issuer reserve reports and attestations, and check whether reserves are segregated and held in cash and short-term, highly liquid assets such as Treasury bills.
Revisit the policy. Review the company's stated policy for what it treats as cash equivalents.
Test the data. Confirm that ledgers and bank or broker statements can break cash equivalents into components at year-end.
Check agreements. Look for loan covenants or other contracts whose definitions of cash could be affected by reclassification.
Comment. Businesses with a view on the examples or effective date can submit comments to the FASB by November 19, 2026.

Sources

This article is general information, not tax, legal, or accounting advice. Consult a qualified professional about your situation.