The US Financial Accounting Standards Board (FASB) has published a proposal to allow companies to classify certain stablecoin holdings as cash equivalents. This could help encourage corporate treasury usage of stablecoins given their status has been unclear. To classify stablecoins as cash equivalents, the holder will need a direct relationship with the stablecoin issuer and the ability to redeem them on demand. Corporates are only likely to do this if they have material holdings.
Without these rules, stablecoin accounting has been inconsistent. Some entities have treated them like other crypto assets, classifying them as intangibles and marking prices to market. Others have accounted for them as receivables. In addition, liquidity calculations used by lenders to assess a company’s repayment capacity treat cash equivalents far more favorably than intangibles.
FASB’s general requirements for cash equivalents are that they are highly liquid and have a maturity of three months or less. The stablecoin proposals specify three additional features. These include a contractual on demand cash redemption right, direct redemption with the issuer for a specific cash amount, and segregated reserve assets held by the issuer on at least a one-to-one basis in short term, highly liquid assets. This raises questions such as why isn’t it sufficient to be able to sell a stablecoin or redeem via a third party, and does Tether qualify?
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