The Financial Accounting Standards Board on August 18 proposed a rule that would allow qualifying stablecoins to be classified as cash equivalents on corporate balance sheets — the same category occupied by Treasury bills, commercial paper, and money market funds. The proposed Accounting Standard...
"It is just as important to tell people what does not qualify as a cash equivalent as what does." — Richard Jones, Chairman, Financial Accounting Standards Board
The Financial Accounting Standards Board on August 18 proposed a rule that would allow qualifying stablecoins to be classified as cash equivalents on corporate balance sheets — the same category occupied by Treasury bills, commercial paper, and money market funds. The proposed Accounting Standards Update, titled Cash Equivalents — Disclosure Enhancement and Evaluation of Certain Digital Assets, establishes a three-part test: direct redemption rights with the issuer, redemption at a known par value, and segregated one-to-one reserve backing in short-term liquid assets. Comments are due November 19, 2026.
The proposal arrives as dollar-pegged stablecoins sit at $303.4 billion in total supply, according to CoinGecko data from October 14, 2026. If finalized, the rule would remove an accounting barrier that has kept most corporate treasuries from booking stablecoin holdings alongside their $7.96 trillion in existing money market fund assets. The standard does not name specific tokens — it defines criteria. That distinction matters: identical stablecoins may receive different accounting treatment depending on who holds them and what contractual rights they possess.
Under pre-existing US GAAP treatment, stablecoins occupied an awkward classification gap. ASC 350-60, which took effect for fiscal years beginning after December 15, 2024, introduced fair-value measurement for qualifying crypto assets — but it explicitly excluded most stablecoins from its scope. Bitcoin and ether qualify under ASC 350-60. Stablecoins generally do not.
The result: a company holding $50 million in USDC backed one-to-one by U.S. Treasury bills could not report those tokens as cash equivalents. The stablecoins did not meet the existing definition because no specific guidance addressed how digital assets fit the ASC 230 framework for cash equivalents. This created a practical problem for CFOs. Stablecoin holdings did not count toward reported cash reserves, distorting liquidity ratios and potentially triggering covenant violations on credit facilities.
Coinbase moved first. In its 2025 annual report, the company voluntarily reclassified USDC, EURC, and PYUSD as cash equivalents, citing its direct redemption arrangement with Circle as the contractual basis. The decision was permissible under existing GAAP — the standard did not prohibit the classification — but it lacked explicit FASB endorsement, leaving auditors and peer companies uncertain about whether to follow.
The proposed ASU resolves the ambiguity by adding digital asset examples to ASC 230's cash-equivalent definition. A stablecoin qualifies only if all three conditions are met simultaneously:
1. On-demand contractual redemption right. The holder must possess a contractual right to redeem the stablecoin on demand, without significant fees or restrictions. The proposal does not define "significant," leaving the threshold to management judgment and auditor interpretation.
2. Direct redemption with the issuer. The holder must have a direct account relationship with the stablecoin issuer. Secondary-market liquidity — selling USDC on Coinbase, for example — does not satisfy this requirement. The contractual right must run directly between the holder and the entity that minted the token.
3. Segregated one-to-one reserves. The issuer must maintain reserves at least equal to 100% of outstanding tokens, segregated in short-term, highly liquid assets: cash, Treasury bills with remaining maturity under three months, and money market fund shares. Reserve composition above the one-to-one minimum may differ.
FASB Chairman Richard Jones framed the test as intentionally restrictive. "We really don't want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date," Jones said. "That's not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine."
The standard is token-agnostic. It does not name USDC, USDT, or any other stablecoin. Classification depends entirely on the holder's contractual rights and the issuer's reserve structure — not the token's brand.
The second criterion — direct issuer access — is the most restrictive element and the one most likely to generate comment letters. As currently drafted, a corporation that purchases $10 million of USDC through a crypto exchange would not qualify for cash-equivalent treatment unless it also maintains a direct redemption account with Circle.
This creates a tiered access structure. Companies with direct issuer relationships — typically large institutions, exchanges, and OTC desks — can classify stablecoins as cash equivalents. Companies that acquire stablecoins through secondary markets cannot, even if the underlying tokens are identical.
The Network Firm, a crypto-focused audit and advisory practice, has stated it intends to submit comment letters advocating for expanded criteria. The firm argues the definition should include "contractual rights with counterparties obligated to redeem at par" — a formulation that would extend eligibility to companies using authorized intermediaries.
The distinction matters at scale. Circle currently maintains direct redemption relationships with a limited number of institutional counterparties. If the final rule retains the direct-issuer requirement without modification, corporate adoption may be constrained by issuer onboarding capacity rather than accounting treatment.
The proposed ASU introduces a new annual disclosure requirement applicable to all reporting entities — not only those holding stablecoins. Companies would be required to break out the significant components of their reported cash equivalents, specifying amounts held in Treasury bills, commercial paper, money market funds, and, where applicable, stablecoins.
This disclosure applies retroactively to all cash-equivalent categories. The effect is twofold: it provides investors with visibility into whether companies hold stablecoins in their cash reserves, and it forces all companies to provide more granular cash-equivalent composition data than current GAAP requires.
The FASB proposal does not operate in isolation. It aligns with — and is partially gated by — the GENIUS Act, signed into law in July 2025 and taking full effect on January 18, 2027.
The GENIUS Act establishes the federal regulatory framework for payment stablecoin issuers, requiring:
The intersection is precise: FASB defines the accounting test, and the GENIUS Act defines which issuers are allowed to satisfy it. Section 3(g) of the GENIUS Act restricts cash-equivalent treatment to stablecoins issued by permitted payment stablecoin issuers after January 2027. An issuer that passes FASB's three-part test but lacks a GENIUS Act license would not qualify.
This creates a dual-gate system. A stablecoin must pass the FASB accounting test and be issued by a GENIUS Act-licensed entity. Neither condition alone is sufficient.
The Federal Reserve published its own notice of proposed rulemaking implementing GENIUS Act responsibilities on September 29, 2026. The FDIC published its corresponding rulemaking on April 10, 2026. All three frameworks — FASB, Fed, FDIC — are converging toward a January 2027 effective date, though the FASB standard's final date remains unset.
The proposal's impact should be measured against the scale of existing corporate cash management. U.S. money market fund assets stood at $7.96 trillion for the week ended October 7, 2026, according to the Investment Company Institute — near the all-time high of $7.98 trillion. Non-financial public companies collectively hold an estimated $2.5 trillion in cash and cash equivalents, with the top 10 companies accounting for one-quarter of that total.
Dollar-pegged stablecoins at $303.4 billion represent roughly 3.8% of money market fund assets. Even a modest reallocation — 1% to 2% of corporate cash equivalents moving into stablecoins — would represent $25 billion to $50 billion in incremental demand.
The infrastructure for this shift is already materializing. Public companies, DAOs, fintechs, and crypto-native operating businesses collectively hold over $35 billion in on-chain stablecoin reserves as of Q1 2026, according to industry data. Corporate treasury use cases have evolved from idle USDC holdings earning zero yield in 2024 to active cross-border settlement workflows, multi-corridor B2B payment operations, and programmable treasury orchestration across ERP systems in 2026.
Tether's USDT commands 60.6% of the dollar-pegged market at $184.1 billion. Circle's USDC holds 23.9% at $72.6 billion. Together they control 84.5% of dollar-pegged stablecoin supply. Whether either token qualifies under FASB's test depends not on market share but on the holder's specific contractual relationship with the issuer.
The FASB proposal arrives as major banks prepare a competitive alternative. JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, BNY, HSBC, PNC, U.S. Bank, Truist, Santander, TD, and Regions are building a tokenized deposit network through The Clearing House, targeting a first-half 2027 launch.
Tokenized deposits would settle on shared blockchain infrastructure and operate 24/7 — functionally similar to stablecoins but issued by regulated banks and backed by FDIC insurance. From an accounting perspective, tokenized bank deposits would not require FASB's three-part test: they would classify as cash deposits, the most liquid category on a balance sheet.
The competitive dynamic is straightforward. If the FASB rule makes stablecoins countable as cash equivalents, the accounting advantage of tokenized deposits narrows. If the rule's direct-redemption requirement limits stablecoin eligibility to a small number of institutions, tokenized deposits gain a structural advantage in corporate treasury adoption.
The FASB proposal is accounting plumbing, not policy aspiration. It answers a narrow question — when can a stablecoin sit in the same line item as a Treasury bill — with a narrow answer: when the holder has direct rights, the issuer has real reserves, and both conditions are verifiable.
The 146-page proposal with 149 comment requests reflects the board's awareness that the answer matters. If finalized as drafted, the direct-redemption requirement will segment the stablecoin market into tokens that count as cash and identical tokens that do not, based solely on the holder's contractual position. Whether the November 19 comment period produces changes to that requirement will determine whether stablecoins enter corporate balance sheets as a mainstream treasury instrument or remain confined to institutions with direct issuer access.
The standard does not create demand for stablecoins. It removes a reporting obstacle for entities that already hold them or would hold them if the accounting worked. The demand question is separate. The accounting question, for the first time, has a proposed answer.