Circle's Jeremy Allaire calls FASB stablecoin proposal 'an enormous strategic unlock'
Key Takeaways
- •FASB proposed on August 18 to clarify when certain stablecoins can be treated as cash equivalents on company balance sheets.
- •A qualifying stablecoin must be redeemable on demand directly with the issuer for a known amount of cash and backed by segregated short-term liquid reserves.
- •The proposal does not change the definition of a cash equivalent, but it would require annual disclosure of the major components of cash equivalents.
- •Circle co-founder Jeremy Allaire said the proposal, alongside the GENIUS Act, could broaden USDC’s use by companies.
- •FASB’s public comment period closes on November 19, after which the board will decide on a final standard and effective date.
Circle (NYSE: CRCL) co-founder Jeremy Allaire has described a new accounting proposal from the U.S. Financial Accounting Standards Board (FASB) as "an enormous strategic unlock" for stablecoins such as USDC, stating on Friday, August 21, 2026, that the change would make it easier for companies to hold tokens.
His comments came three days after FASB issued a proposal that would allow financial institutions and corporations to classify qualifying stablecoins as cash equivalents on their balance sheets. As the private-sector body that writes U.S. generally accepted accounting principles, the accounting rules public companies must follow, the board's decisions reach every listed balance sheet.
Why Allaire is speaking out on accounting rules
Circle issues USDC, one of the largest stablecoins in circulation, and Allaire rated the proposal "a nine out of 10." He tied the new policy to the GENIUS Act, saying the accounting change, coupled with the passage of the GENIUS Act, would pave the way for wider usage of USDC. That law, signed in July 2025, gave the United States its first federal framework for payment stablecoins, obliging issuers to back their tokens with high-quality liquid reserves and to redeem them at face value.
The enthusiasm has a practical basis. How a company records a stablecoin on its books can determine whether a corporate treasurer touches it at all. When lenders gauge a borrower's capacity to repay a loan, they weigh cash equivalents more heavily than intangible assets. A token treated as an intangible asset therefore carries a balance-sheet penalty, while a cash-equivalent token does not. The intangible route also carries a one-way asymmetry: under GAAP, a holder writes the position down when its value falls and cannot book the recovery until the asset is sold. FASB has already moved once on digital assets, requiring bitcoin and other in-scope tokens to be carried at fair value since fiscal 2025, but assets that grant holders enforceable redemption rights sit outside that standard.
What FASB proposed
On August 18, the board released its proposed Accounting Standards Update. The update contains additions to Topic 230, the standard covering the statement of cash flows. FASB chose this route rather than changing the definition of a cash equivalent, which covers short-term, highly liquid investments readily convertible to a known amount of cash — in practice, instruments within roughly three months of maturity.
According to Deloitte's summary of the proposal, the definition remains unchanged. The only changes concern the surrounding guidance, along with a new rule requiring every company that reports cash equivalents to disclose their major components each year, whether or not any digital assets are involved.
The public comment period closes on November 19. FASB has made clear that it will choose a final standard and an effective date only after it has reviewed the feedback. For now, nothing is settled.
The three tests a token must clear
FASB laid out clear criteria that a stablecoin must meet before it can be considered a cash equivalent:
- The holder must have an on-demand contractual right to redeem the token.
- Redemption must occur directly with the issuer for a known amount of cash.
- The issuer must maintain segregated reserves worth a minimum of one dollar of short-term, highly liquid assets for every token in circulation.
The ability to sell a token on an exchange does not matter. FASB believes that market prices can move away from the promised value under stress, so secondary-market liquidity on its own does not pass the test. USDC went through precisely such an episode in March 2023, when $3.3 billion of Circle's reserves sat in the failed Silicon Valley Bank and the token traded well below its $1 peg before par was restored.
The board also turned down cash treatment where reserves contain volatile assets such as cryptocurrencies or gold. That outcome effectively excludes algorithmic and overcollateralized tokens, even those tagged as stablecoins. Meeting the conditions FASB laid out is optional rather than mandatory for a qualifying company.
Coinbase has already moved, but not everyone is sold
Coinbase (NASDAQ: COIN) began using a new accounting method on December 31, 2025. The company told the SEC that USDC, EURC, and PYUSD are backed by segregated cash-equivalent reserves and are redeemable one-to-one. Coinbase applied the change retrospectively and stated that there were no alterations to previously reported assets, liabilities, equity, net income, or earnings per share.
The proposal has its skeptics. Jack Castonguay, an accounting professor at Hofstra University, expressed glee that the draft "didn't go farther" and still believes that allowing stablecoins to sit under cash is a step too far.
The November 19 comment deadline is one to watch. By then, it will become clear how issuers, corporate treasurers, and auditors feel before FASB makes a final decision. Until then, the two accounting tracks remain separate.
