A wallet balance can prove that a company controls one million stablecoins. It cannot prove that the company has a legal route to convert those tokens into cash with the issuer.

That gap sits at the center of the US Financial Accounting Standards Board's new proposal on cash equivalents and digital assets. FASB is asking companies to look beyond a stablecoin's price and trading volume when deciding whether the token belongs in cash equivalents under U.S. GAAP.

The proposal extends the board's digital-asset accounting work. In December 2023, FASB issued Accounting Standards Update 2023-08, which requires fair-value measurement for in-scope crypto assets such as Bitcoin and Ether. The new document addresses a different part of the balance sheet: whether a token tied to a fiat currency can sit in cash equivalents at all.

Some stablecoins could qualify. The proposal sets a demanding path, and the holder's own contract may be the element that decides the outcome. A company with direct redemption access could reach a different answer than another company holding the very same token through an exchange or a payment provider.

One stablecoin balance, three documents

FASB's proposed examples turn the assessment into a paper trail. Before treating a digital asset as a cash equivalent, a company would need to connect three separate records:

The balance record. A wallet, custodian or exchange account shows the number of tokens held. It establishes the position, not the terms attached to it.

The holder's contract. The company must establish whether it holds a qualifying, on-demand contractual right to redeem the token directly with its issuer for a known amount of cash.

The issuer's reserve information. The reserves must be segregated and composed of cash or short-term, highly liquid assets that support conversion into a known cash amount.

The first document is usually easy to find. The second can be more difficult. A company may buy a stablecoin on an exchange, receive it from a customer or keep it with a custodian without ever entering a redemption agreement with the issuer.

FASB's proposal keeps the existing definition of cash equivalents: short-term, highly liquid investments that can be converted into known amounts of cash with insignificant risk of a change in value. Its examples are designed to show how stablecoins fit, or fail to fit, inside that definition.

The issuer line is where holders separate

Exchange liquidity and issuer redemption are different things. Selling a token on an exchange means finding another buyer at the quoted market price. Redeeming a token means presenting it to the issuer and receiving the stated cash amount under a contractual arrangement.

A stablecoin can have both features. A particular holder may have only one of them.

That distinction matters for corporate users. A large trading venue or financial institution may have an account arrangement that allows direct redemption. A retailer that accepts the same token through a payments processor may hold contractual rights only against the processor. The token balances could be economically similar, yet the legal path to cash is different.

Custody arrangements require the same scrutiny. The question is not simply whether a custodian can process a redemption. Auditors would need to establish whether the company itself holds the right that FASB's examples describe, or whether that right belongs to another party in the chain.

Reserves move from marketing material to accounting evidence

Stablecoin reserve reports are usually read by crypto traders seeking reassurance about a peg. FASB's proposal gives them a more practical purpose for companies: they become evidence in a cash-equivalent assessment.

Cash, overnight repurchase agreements, government money-market funds and short-dated Treasury securities fit naturally with the test for a short-term, highly liquid investment. The mix resembles what a government money-market fund holds, but the legal wrapper differs: fund shareholders hold contractual redemption rights, a feature many stablecoin holders lack. Gold, Bitcoin, Ether and other volatile assets make a harder case, because their values can move well beyond the small fluctuations expected of a cash equivalent.

This is why reserve construction matters even among dollar-pegged tokens. Our USDC and USDT comparison shows how the two issuers use different reserve approaches despite targeting the same one-dollar price.

A reserve portfolio made up of cash-like assets would clear only one part of the assessment. It would not give an exchange customer or a corporate wallet holder a redemption right that their contract does not provide.

The accounting result may change before the token does

Disclosure would put stablecoin exposure in view

FASB is also proposing annual disclosure of significant classes of cash equivalents and their related amounts. A company that classifies a qualifying stablecoin in that line item would need to identify it, giving investors and lenders a clearer view of how much of the reported cash-equivalent balance depends on a token issuer and its reserve arrangement. The stakes go beyond presentation: cash-equivalent totals feed the liquidity measures and lending-agreement covenants that reference the "cash and cash equivalents" line.

Regulators and accountants are tackling different questions

The proposal arrives as Treasury officials separately develop payment-stablecoin rules under the GENIUS Act. As our team recently reported, that process addresses the issuance, offering and sale of stablecoins in the United States. FASB's question arises later: a company already holds the token and must decide how to present it in its accounts.

The holder's contract could decide the result

An issuer may satisfy a regulatory standard while a corporate holder lacks the contractual right to redeem directly for cash. A direct redemption agreement, meanwhile, cannot compensate for reserves that fail the proposed cash-equivalent criteria.

The proposal remains open for comment and is not final. Under FASB's standard process, the board reviews comment letters before deciding whether and how to finalize guidance, so the wording of the examples could change before any standard takes effect. The proposal would not place stablecoins in the cash-equivalents line automatically. Companies would have to show both a cash-like reserve structure and a direct claim on the issuer. The token symbol in a wallet would provide only part of that evidence.