The Financial Accounting Standards Board (FASB) has proposed guidance outlining when companies may classify certain stablecoins as cash equivalents under generally accepted accounting princip
The Financial Accounting Standards Board (FASB) has proposed guidance outlining when companies may classify certain stablecoins as cash equivalents under generally accepted accounting principles in the United States.
On Tuesday, the FASB said the proposed Accounting Standards Update would add illustrative examples to the current definition, addressing inconsistent treatment of digital assets such as stablecoins. The definition itself would remain unchanged.
The proposal says a qualifying digital asset would need an on-demand contractual redemption right, a direct redemption right with its issuer for a known cash amount and at least one-to-one segregated reserves held in short-term, highly liquid assets.
One example said active secondary markets would not be enough if the holder lacks a direct issuer redemption right. Another example said reserves comprising crypto assets and gold would disqualify a token due to valuation risks.
Companies would retain the choice of whether to present qualifying assets as cash equivalents and would need to consider relevant laws and regulations.
FASB is accepting public comments on the proposed update until Nov. 19. The organization will set an effective date after reviewing stakeholder feedback.
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