FASB adds project to clarify stablecoin 'cash equivalent' status amid regulatory uncertainty

The U.S. accounting standard-setter, FASB, voted on Oct. 29, 2025, to add a project to its technical agenda aimed at clarifying how stablecoins and similar digital assets should be classified on financial statements. The move specifically targets whether these emerging digital assets can qualify as cash equivalents under existing accounting rules, a decision intended to provide guidance amidst regulatory uncertainty and diverse market practices.

The Financial Accounting Standards Board's (FASB) decision signals a recognition of the growing presence of stablecoins-digital currencies typically pegged to a stable asset like the U.S. dollar-within financial ecosystems. While their widespread use across all industries is not yet fully established, board members acknowledged their anticipated future growth and the need to address existing inconsistencies in how companies currently categorize them in financial statements.

"There's uncertainty in the application of GAAP today," stated FASB Chair Richard Jones, underscoring the board's role to "help bring clarity." He advocated an approach that provides illustrative examples of what attributes would, and would not, allow a digital asset to meet the current definition of a cash equivalent. Key characteristics under consideration include direct, enforceable redemption rights from the issuer for cash and fully collateralized and qualifying reserve assets.

Pervasiveness and internal debate

The vote to add the project passed with a 6-1 majority, underscoring significant internal debate. Board member Christine Botosan dissented, questioning the immediate pervasiveness of stablecoins outside crypto trading and citing minimal investor interest. She highlighted that only about 6% of stablecoin transactions relate to legitimate business use, with the vast majority tied to crypto trading and noted their "very, very, very tiny fraction" of global U.S. dollar payment volume.

Botosan also raised concerns about the FASB potentially preempting federal regulations, specifically referencing the "GENIUS Act," anticipated in 2027. This act is expected to establish federal guidelines for stablecoin issuers regarding reserves and redemption mechanisms, which directly impacts their GAAP classification. "I'm pretty concerned that if we get out in front of these regulatory changes, we may make changes today to GAAP that we have to undo tomorrow," Botosan cautioned, advocating for the issue to remain on the research agenda.

Other board members, like Frederick Cannon, acknowledged an "anticipatory pervasiveness" of stablecoins but stressed the "significant risks" of these "private money" instruments, which differ fundamentally from fiat currency. Conversely, Vice Chair Hilary Salo and Jones noted that while regulatory environments must be considered, FASB's purview lies in establishing GAAP and companies ultimately elect accounting policies that comply with both.