FASB sets conditions for stablecoins as cash

• FASB proposed rules for when companies could classify some stablecoins as cash equivalents.
• Qualifying tokens would need direct issuer redemption and one-to-one liquid reserves.
• Companies would still choose whether to classify eligible tokens as cash equivalents.

The Financial Accounting Standards Board proposed guidance for classifying some stablecoins as cash equivalents under US accounting rules.

The proposal would add examples to existing guidance without changing the current definition of cash equivalents.

A qualifying stablecoin would need on-demand redemption and direct access to the issuer for a known cash amount.

It would also need at least one-to-one reserves held separately in short-term, highly liquid assets.

FASB said secondary-market liquidity alone would not qualify a stablecoin if holders lacked direct issuer redemption rights.

Stablecoins backed by crypto assets or gold would also fail the proposed test because of valuation risks.

FASB will accept public comments until November 19 before setting an effective date for the guidance.