On August 18, 2026, FASB issued a proposed Accounting Standards Update (ASU) on a question that has divided practice since companies first held stablecoins in treasury: when does a stablecoin count as a cash equivalent? The proposal keeps the current definition of a ‘cash equivalent’, but provides clarity as to when a stablecoin could be considered one. In this article, we explore the key considerations and downstream impacts of the proposed ASU for stablecoin issuers and stablecoin holders.

What the FASB Proposal Contains

The FASB’s proposed ASU does not change the definition of ‘cash equivalents’, but clarifies how the existing definition applies to certain digital assets (i.e. stablecoins). As a reminder, the definition of a cash equivalent is below:

Cash equivalents are short-term, highly liquid investments that have both of the following characteristics:

Readily convertible to known amounts of cash
So near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month U.S. Treasury bill and a three-year U.S. Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations).

Within the proposed ASU, three (3) important attributes are highlighted, which would be used to evaluate whether the stablecoin in question could be classified as a ‘cash equivalent’ under the current definition. The proposed ASU adds an annual disclosure of the significant components of cash equivalents, which, would include a breakdown of the stablecoins held (along with other cash equivalents).

The Three Attributes a Stablecoin Must Meet to Be a Cash Equivalent

The proposed ASU outlines the three (3) attributes that a stablecoin must fulfill in order to be classified as a ‘cash equivalent.’ As we will analyze below, it is not only the stablecoin itself that matters, but also the stablecoin holder's relationship to the issuer that will be part of the assessment of whether a stablecoin qualifies.

Attribute #1: An On-Demand Contractual Cash Redemption Right

Since stablecoins do not have stated maturities (like a treasury bill), the FASB Board acknowledged that stablecoins are equivalent to having an immediate maturity. However, the stablecoin must also not charge significant fees or impose significant restrictions to redeem. In practice, this would mean that stablecoin holders must be able to redeem without significant fees. What would be classified as ‘significant’? The proposal does not say, so management will need to set a threshold, document it, and apply it consistently, subject to auditor evaluation. “Significant restrictions” is likewise undefined. In our view it would capture delays in redemption — we would start scrutinizing anything beyond two to three days — or actions that must be taken before redemption is available, such as un-staking or withdrawing from a liquidity pool.

Attribute #2: Direct Redemption Right with the Issuer for Known Amounts of Cash

This attribute is likely the most important element and disqualifier for most stablecoin holders. In practice, most stablecoin holders acquire stablecoins and “redeem” (or, in reality, sell) their stablecoins for $1 on secondary markets. Under the proposed ASU, only stablecoin holders with a direct redemption right (i.e. account) with the issuer would be able to classify the stablecoin as a cash equivalent. The Board evaluated whether indirect redemption rights would be appropriate (i.e. redeeming USDC on Coinbase), but concluded that this would not be appropriate. In practice, that means two holders of the same stablecoin can reach different conclusions on their financial statements, depending on whether each has a direct redemption right with the issuer and on the terms of that right. The Board said as much in its basis for conclusions, reasoning that indirect redemption rights add counterparty credit risk and a chain of contractual relationships that makes conversion to cash less direct and less certain.

Attribute #3: Segregated Reserves held on a 1:1 Basis in Short-Term, Highly Liquid Assets

Unsurprisingly, the Board noted that each stablecoin under consideation must be backed on at least a 1:1 basis relative to units issued and outstanding. However, the composition of reserves should include highly liquid investments that are so near to maturity that interest rate fluctuations do not have a material impact on the underlying reserves. In practice, that means the stablecoin should be primarily backed with Cash, Treasuries with a maturity under 3 months, or like-kind instruments (money-market funds). Importantly, the Board distinguished between the amount of reserves held to back the stablecoin on a 1:1 basis, and “excess” reserves that are held in excess of 100% of stablecoins issued. The Board noted that the “excess reserves” may not have to be comprised the same as the “primary” reserves, or those required to maintain a 1:1 basis.

Impacts for Stablecoin Issuers

If adopted, the proposed ASU will have material competitive impacts for stablecoin issuers.

Commercial Opportunities

In an environment where stablecoins appear similar, a key competitive differentiator will be whether a stablecoin can be considered a cash equivalent by token holders. The accounting, reporting, and audit efficiencies are material, so much so that it may be the differentiator in a company selecting one stablecoin over the other. We recommend that stablecoin issuers view this as a serious opportunity (or threat) to create substantial demand for their stablecoin(s).

Direct Redemption Rights are the Biggest Challenge

Today, many stablecoin issuers have “primary customers” (such as market makers and liquidity providers) and “secondary market customers.” The problem is that only “primary customers” will be able to treat the stablecoins under this proposal as a cash equivalent, given the direct redemption requirement. Therefore, we expect to see more stablecoin issuers offer “business accounts,” or direct accounts with token holders, rather than just market makers and liquidity providers. This will likely increase operational overhead and customer management requirements for stablecoin issuers themselves. However, if they want the stablecoin to be considered a cash equivalent for most of their token holders, this will likely be the route. Alternatively, we may see “Whitelabel” arrangements, whereby exchanges or crypto platforms act as a “pass through” to an account directly with the issuer, and thus granting the “direct redemption right.”

Reserve Composition

Historically, stablecoin issuers have held different instruments in the reserve basket, oftentimes including assets with a maturity greater than 3 months, such as Treasuries maturing in 6 months. However, to be classified as a cash equivalent, and perhaps under the GENIUS Act as well, the reserve assets will become much narrower. The market is already responding, with asset managers such as WisdomTree, Invesco, and BlackRock building products intended to be GENIUS-compliant that should also hold only assets meeting the cash-equivalent definition.

Impacts for Stablecoin Holders and Users

If adopted, the proposed ASU will have material downstream impacts for stablecoin holders.

Enhanced Stablecoin Due Diligence Processes

Stablecoin users and holders who would like to classify the stablecoins as cash equivalents will likely want to begin inspecting terms, redemption rights, and open accounts directly with the issuers as soon as possible. Not only does the stablecoin have to fulfill the attributes of a cash-equivalent, but the token holder also needs to have a direct redemption right with the issuer, and opening a direct account with the issuer is the most streamlined approach to fulfilling this attribute.

Financial Statement Impacts

The proposed ASU would require a “breakout” of the cash equivalent line item in the financial statements within the Notes. Components and their amounts (i.e. amount of Treasury Bills, commercial paper, MMFs, stablecoins) will need to be disclosed. We do not expect this to be a large burden, but an item for crypto CFOs to be aware of. Additionally, token holders should begin planning to include stablecoins as a “cash equivalent” within the statement of cash flows.

Alignment with the GENIUS Act

While not explicitly stated in the ASU, the GENIUS Act provides that a payment stablecoin that is not issued by a permitted payment stablecoin issuer (PPSI) “shall not be … treated as cash or as a cash equivalent for accounting purposes.”

Therefore, even though the proposed ASU does not exclude non-GENIUS compliant stablecoins from achieving cash equivalent status, Section 3(g)(1) narrows the field independently: once the Act’s restrictions take effect on or before January 18, 2027, a payment stablecoin issued by anyone other than a PPSI cannot be treated as a cash equivalent for accounting purposes. Two limits on that overlay are worth noting. The test is keyed to issuance by a PPSI, not to “GENIUS compliance” in the general sense, and it reaches only instruments that meet the Act’s definition of a payment stablecoin. Treasury has also asked for comment on how Section 3(g)(1) should operate for accounting purposes, so the mechanics are not fully settled.

That means a stablecoin issued by a foreign payment stablecoin issuer would not qualify as a cash equivalent. The Act defines a PPSI as a U.S.-formed entity in one of three categories: a subsidiary of an insured depository institution approved under the Act, a federal qualified payment stablecoin issuer, or a state qualified payment stablecoin issuer. A foreign issuer operating under a regime that Treasury determines is comparable, and registered with the OCC under Section 18, may offer its stablecoin in the United States, but may still not be a PPSI, and thus be a disqualifier for cash equivalent status. The Act does not prevent a foreign group from forming a U.S. subsidiary that is approved as a PPSI, and a stablecoin issued by that subsidiary would sit outside the Section 3(g)(1) restriction.

Importantly, this the clause in the GENIUS act prevents "crypto-collateralized”, algorythmic, or other novel stablecoin reserve models from being classified as a cash equivalent.

Effective Date, Transition, and Early Adoption

No effective date is set, and early adoption would be permitted. The disclosure applies prospectively. The classification guidance applies on a modified prospective basis to digital assets held at adoption, with a reconciliation of the opening balance of cash, cash equivalents, and restricted cash in the year of adoption.

What Stablecoin Issuers Should Do Now

The proposal is written as a holder's analysis, but two of the three attributes sit on the issuer's side. An issuer that wants its stablecoin eligible for the cash equivalent classifcation should review these three main areas as soon as possible.

Re-evaluate Reserve Composition

The issuer should hold reserves one-to-one in cash and assets that mature in three months or less, or in money market funds, including tokenized ones, that themselves qualify as cash equivalents. Many issuers hold longer-dated Treasuries today, and under the proposal that composition would keep the token off the cash-equivalent line item. We recommend stablecoin issuers begin evaluating different reserve assets for appropriateness. Tokenized money-market funds are likely going to be the most advantageous asset due to native blockchain rails, purpose-built composition, and quicker conversion to cash.

Prepare Direct Redemption Access

Holders need an on-demand contractual right, which means an account directly with the issuer. We recommend stablecoin issuers either begin preparing to enable “business-to-business” accounts directly with token users or partner with a “pass-through” platform that will enable token holders to have a direct redemption right.

Fee and Revenue Model Evaluation

Redemption has to return a known amount of cash, and a 1% redemption fee raises a fair question about whether a unit is truly “worth” a dollar. Facts and circumstances govern, but the lower the redemption fee, the better. We recommend stablecoin issuers explore revenue models that do not rely on minting or redemption fees, and instead focus on interest income, service enhancements, and ancillary value-added activities.

Comment Period is Now Open

Comments to the proposed ASU are due on November 19, 2026.

At The Network Firm, our comment letter will be focused on the direct redemption requirement.

We believe the FASB should consider extending the redemption attribute from a contractual right with the issuer to a contractual right with a counterparty obligated to redeem at par, the way a platform like Coinbase converts USDC at par even though Circle is the issuer. That one change would open the classification to a much larger set of institutional and commercial holders. Redeliberation could also move the other direction and add tests, such as sufficient liquidity, issuer redeemability, arbitrage behavior, or historical price, so comment letters should watch scope both ways.

Stablecoin Cash Equivalent FAQ

No. A stablecoin and its holder need to fulfill all three attributes (1) the holder holds an on-demand contractual cash redemption right, (2) the holder must have a direct redemption right with the issuer for known amounts of cash, and (3) the issuer must hold segregated reserve assets on at least a 1:1 basis in short-term, highly-liquid assets.
No. The proposal covers presentation and disclosure. Measurement standards do not change, and neither does the definition of cash equivalents.
This is where the practical benefit lands. If a stablecoin qualifies as a cash equivalent, movements in and out of it stop generating investing or operating activity to classify and instead sit inside the cash and cash equivalents balance. Anyone who has prepared or audited a statement of cash flows for a stablecoin-heavy business knows how much classification work that removes. In the year of adoption, a reconciliation of the opening balance of cash, cash equivalents, and restricted cash is required.
No date is set. Comments close November 19, 2026, and the Board will set an effective date after redeliberation, with early adoption permitted.

Our Take: A High Bar for Cash Equivalent Classification is Warranted

Overall, this proposed ASU by the FASB is a welcomed initiative. While we believe incremental enhancements to the ASU can be made, maintaining a high bar for cash-equivalents classification is imperative to a strong and reliable financial system. As stablecoins proliferate, this ASU is a key enabler for using stablecoins in day-to-day transactions over blockchain rails.

For stablecoin issuers, TNF supports reserve attestations, GENIUS readiness, and the operational work behind reserve composition and direct redemption programs. For stablecoin users and holders, our team supports financial statement preparation, ongoing accounting, and special projects, including formal evaluations of whether a given stablecoin qualifies as a cash equivalent. If you issue a stablecoin and want it eligible for the cash line, or you hold stablecoins and want to know whether that position would survive an auditor's review, talk to a TNF expert.

Talk to a TNF expert.

Author Bio:
Jeremy is a founding member and audit partner at The Network Firm and co-creator of LedgerLens, a suite of digital asset-focused audit and attestation tools. Jeremy holds credentials as a Certified Public Accountant (CPA), Certified Management Accountant (CMA - inactive), and Certified Bitcoin Professional (CBP).

Over his 10-year career, including 7 years focused on digital assets, Jeremy has led audit and attest engagements across various industry niches, including exchanges, custodians, miners, token projects, wallets, payment processors, and stablecoins. Jeremy specializes in “Proof of Reserve” engagements.

Jeremy’s goal is to shape the future of the accounting profession, strengthened by verifiable, transparent, and trusted blockchain ledgers.

Connect with Jeremy Nau on LinkedIn/Twitter for more expert advice.

Are Stablecoins Cash Equivalents? Inside FASB's 2026 Proposed ASU