Hadamard Get the app

Are Stablecoins Cash Equivalents? FASB’s 3-Part Test Explained

Are Stablecoins Cash Equivalents? FASB's 3-Part Test Explained — Hadamard

Are stablecoins cash equivalents? Under a FASB proposal published on August 18, 2026, some can be. To qualify, a stablecoin needs an on-demand, direct right to redeem with the issuer for known amounts of cash, and it must be backed by segregated reserves of at least one-to-one held in short-term, highly liquid assets. The proposal is not final. Comments are due November 19, 2026, and FASB has not yet set an effective date.

For a company holding USDC, the stablecoin itself is often not the hard part. What matters more is how the company holds it. Under the proposal’s examples, a holder who can only sell on a secondary market reaches a different answer than a holder who can redeem directly with the issuer.

Are stablecoins cash equivalents? The short answer

Some stablecoins can be, under conditions, and the guidance is still only a proposal. FASB is not writing a new definition. According to KPMG’s summary of the proposed ASU, “The clarification would not change the Master Glossary definition of ‘cash equivalents’.” Instead, the Board adds illustrative examples that show how the existing definition applies to digital assets.

Classification would also be a choice. An entity would not have to classify a digital asset as a cash equivalent just because it has characteristics consistent with the examples, as Forvis Mazars explains. According to Uniqus, entities “will need to establish and consistently apply an accounting policy for assets that meet the applicable criteria.”

What the FASB stablecoin proposal says

The exposure draft is titled “Proposed Accounting Standards Update, Statement of Cash Flows (Topic 230): Cash Equivalents—Disclosure Enhancement and Evaluation of Certain Digital Assets,” as CPA Practice Advisor reported on August 18, 2026.

Why FASB acted

Stakeholders were unsure whether certain digital assets, including stablecoins, qualify as cash equivalents under US GAAP. They raised the question during the previous year’s agenda consultation and in other feedback. CPA Practice Advisor says this uncertainty led to diversity in practice. The Journal of Accountancy describes the amendments as a response to “uncertainty expressed by stakeholders regarding whether certain digital assets meet the definition of cash equivalents under current GAAP.”

The project goes back to late 2025. PYMNTS reported that FASB had “added a project to its technical agenda to clarify whether certain digital assets may be classified as cash equivalents.” At its April 15, 2026 meeting, the Board decided to keep the definition and add illustrative examples to ASC 230 instead. It noted that the bar to qualify “remains high,” according to CBIZ.

The three conditions a stablecoin must meet

The illustrative examples rely on three attributes:

  1. On-demand redemption: the holder has a contractual right to redeem for cash on demand.
  2. Direct redemption with the issuer: the right is held directly with the issuer, for known amounts of cash.
  3. Qualifying reserves: the issuer holds reserve assets that are segregated, at least one-to-one against the digital assets in circulation, and invested in short-term, highly liquid assets.

Uniqus adds that minimum thresholds, waiting periods, KYC requirements or issuer suspension rights may restrict redemption, and that “secondary market liquidity alone is not sufficient.” It also points out a gap. The examples do not explain how on-demand redemption fits the existing definition’s interest-rate-risk requirement when an asset has no stated maturity.

The three examples: what qualifies and what doesn’t

Scenario Outcome Reason
Redeemable directly with the issuer at $1 per token; reserves in cash and Treasury bills maturing in three months or less Qualifies Meets all three attributes
Holder expects about $1 per token by selling on a secondary market instead of redeeming directly Different conclusion Intermediaries add counterparty credit risk and make conversion into cash less direct and less certain
Stablecoin backed by crypto assets and gold Does not qualify Reserve values can change for reasons other than interest rates

Source: Forvis Mazars, October 1, 2026.

Why many USDC holders may not pass the direct redemption test

USDC accounting under GAAP depends on the holder’s contractual position with Circle. Circle’s USDC Terms, last updated October 15, 2026, state that “Only Users Type A can redeem USDC directly with Circle,” meaning Circle Mint account holders. Other holders can redeem only after registering a Circle Mint account.

The terms also set conditions that bear on the “on-demand” and “known amounts” attributes:

  • Rate: Circle “will always redeem such USDC at a rate of one USD ($1) per one (1) USDC, less fees where applicable.”
  • KYC: For US residents, Circle must collect and verify identifying information under the USA PATRIOT Act, and “You will be required to comply with our KYC procedures in order to redeem any USDC.”
  • Discretion: Circle may decline issuances or redemptions without prior notice, and “may, in our sole discretion, delay issuances or redemptions if we reasonably believe the transaction is suspicious.”

In practice, a merchant that takes USDC into a wallet or exchange account and has no Circle Mint account looks more like the secondary-market example than the qualifying one. A company with a Circle Mint account and completed KYC is closer to the qualifying example. It would still need to assess fees, KYC and Circle’s rights to decline or delay against the Uniqus point that such features may restrict redemption. Work through these questions with your auditors, because the proposal leaves room for judgment.

The analysis is the same however the USDC arrives. Hadamard builds BB84, a hash-based Layer 2 on Ethereum where merchants receive USDC and EURC. Payments to registered merchants are gas-free, and merchants pay a 0.5% goods and services fee. Under the proposal, though, classification depends on the holder’s redemption arrangement with the issuer, not the network the token moved on. For the cost side of accepting stablecoins, see our comparison of stablecoin payment fees and credit card fees.

The new disclosure rule that applies to every company

The second half of the proposal reaches beyond crypto. Every entity that presents assets as cash equivalents would disclose the significant components and their amounts in annual periods, whether or not it holds digital assets. Examples of components include Treasury bills, commercial paper, stablecoins and money market funds, according to KPMG and CPA Practice Advisor.

FASB says the change “would better align with a similar disclosure requirement under IFRS Accounting Standards.” Uniqus notes that “significant” is not defined, so entities will need a documented threshold.

Uniqus also flags several knock-on effects for companies that do classify stablecoins as cash equivalents:

  • Cash flow presentation: purchases and redemptions of cash equivalents are not investing cash flows, so presentation may change.
  • Debt covenants: a loan agreement’s definition of cash may differ from the GAAP definition.
  • Controls: new controls would be needed for classification, issuer information and the new disclosure.

Stablecoins that don’t qualify: where ASU 2023-08 fits

It is tempting to assume that a stablecoin which isn’t a cash equivalent simply falls under ASU 2023-08 (ASC 350-60), the existing crypto standard. That is not automatic.

Under ASU 2023-08, in-scope crypto assets are measured at fair value under ASC 820, “with any changes in fair value reported in net income each reporting period.” The standard is effective for fiscal years beginning after December 15, 2024, and early adoption was allowed. Its scope, however, excludes assets that give “enforceable rights to—or claims on—underlying goods, services, or other assets,” as Forvis Mazars summarized in December 2023.

According to Uniqus, a redeemable stablecoin with an enforceable claim to cash is generally outside ASC 350-60. It would typically fall under financial instruments guidance (ASC 310, 320 or 825), with ASC 350-30 applying only where no other guidance does. The proposal’s examples do not address digital assets that fail to qualify, so stablecoin balance sheet classification for those holdings remains a separate analysis.

Timeline, GENIUS Act and a checklist for finance teams

Key dates and transition

  • August 18, 2026: exposure draft issued.
  • November 19, 2026: comment deadline.
  • Effective date: to be set after FASB considers stakeholder feedback.
  • Early adoption: permitted under the proposal, as long as financial statements have not been issued (Uniqus).

The digital-asset examples would apply on a modified prospective basis from the beginning of the annual period that includes the adoption date. For each interim and annual period in the adoption year, entities would reconcile opening balances of cash, cash equivalents, restricted cash and restricted cash equivalents before and after adoption. That reconciliation can go in the cash flow statement or in transition disclosures. The component disclosures would apply prospectively, from the end of the annual period in which an entity first applies the amendments (KPMG; Uniqus).

The GENIUS Act timing issue

The GENIUS Act was enacted July 18, 2025, and is generally effective January 18, 2027. Treasury issued a notice of proposed rulemaking on August 17, 2026, “addressing who may issue, offer, or sell payment stablecoins.” Uniqus points out a timing issue: a stablecoin “could meet the FASB’s illustrative characteristics on December 31, 2026,” but “its issuer could be subject to different licensing requirements once the GENIUS Act takes effect.” Companies should therefore consider the issuer’s regulatory status and watch for changes in its licensing. For more on the regulatory side, see our explainer on the GENIUS Act effective date and the OCC rule.

Checklist

  1. List your stablecoin holdings by issuer and by where they are held: self-custody wallet, exchange or issuer account.
  2. For each holding, check whether your entity has a direct redemption right with the issuer, such as a Circle Mint account with completed KYC.
  3. Read the issuer’s terms for fees, minimums, waiting periods and rights to decline, delay or suspend redemptions.
  4. Review the issuer’s reserve composition, segregation and coverage against the one-to-one, short-term, highly liquid standard.
  5. Decide on and document an accounting policy, since classification is an election.
  6. Set a documented threshold for “significant” components of cash equivalents.
  7. Compare debt covenant definitions of cash against GAAP.
  8. Model the effect on cash flow presentation and plan the transition reconciliation.
  9. Design controls for classification, issuer monitoring and the new disclosure.
  10. Track issuer licensing status as the GENIUS Act takes effect.
  11. If the proposal affects you, consider submitting a comment letter by November 19, 2026.

FAQ

Can my company report USDC as “cash and cash equivalents” today?

The FASB proposal is not final and has no effective date yet. FASB started the project because stakeholders were unsure about the question and practice varied. Once the guidance is final, early adoption would be permitted for financial statements not yet issued. Until then, discuss your position with your auditors.

Does holding USDC on an exchange, rather than redeeming through Circle Mint, qualify?

Probably not. In the proposal’s example, a holder who expects about $1 per token by selling on a secondary market reaches a different conclusion, because intermediaries add counterparty credit risk. Circle’s terms limit direct redemption to Circle Mint account holders.

When will the FASB stablecoin rule take effect, and can we adopt it early?

FASB will set the effective date after reviewing comments, which are due November 19, 2026. The proposal permits early adoption if financial statements have not been issued.

Is a crypto- or gold-backed stablecoin a cash equivalent under the proposal?

No. The proposal’s example of a stablecoin backed by crypto assets and gold does not qualify, because reserve values can change for reasons other than interest rates.

Sources