Enacted into law on July 18, 2025, the GENIUS Act creates the first federal framework for digital assets, focusing on stablecoins. As a result, the stablecoin market is expected to grow significantly within the United States. U.S. GAAP does not provide a definitive standard related to accounting for stablecoin. Authoritative bodies are coming to the table to provide guidance based on the form, function, and redemption rights of the stablecoin.
While stablecoins often function like cash in daily transactions, current accounting standards do not clarify if stablecoins should be recognized as cash equivalents, presenting unique challenges for financial reporting and compliance. In addition, presenting stablecoins as assets other than cash equivalents may mean that transactions involving stablecoins are not included in the statement of cash flows, potentially resulting in a misleading presentation of an entity’s cash flow activities.
Based on feedback received, FASB decided to add a project to its research agenda related to the classification of certain digital assets as cash equivalents. The project page can be found here.
There are four primary types of stablecoins issued in the market:
- Fiat-Backed Stablecoins
- Commodity-Backed Stablecoins
- Crypto-Collateralized Stablecoins
- Algorithmic Stablecoins
This article explores the potential accounting treatment of stablecoins, but for purposes of analysis, only fiat-backed stablecoins are within the scope of this article.
Are Stablecoins Cash Equivalents?
The master glossary of existing GAAP defines cash as: “Currency on hand and demand deposits.” Cash equivalents are: “Short-term, highly liquid investments that are readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value due to changes in interest rates.”
Cash equivalents are financial instruments such as Treasury bills, commercial paper, and money market funds that may have one or more of the following characteristics:
- Denominated in legal tender, e.g., U.S. dollars
- Issued by a sovereign government or regulated financial institution
- Have maturity of three months or less (from the date of acquisition)
- Readily convertible to cash (highly liquid)
Although stablecoins are designed to maintain a stable value (often pegged to fiat currency like the U.S. dollar), they do not meet the accounting definition of cash or cash equivalents for the following reasons:
- Not Legal Tender: Stablecoins are not issued by a sovereign government and are not recognized as legal tender. They are digital representations of value, but not actual currency under U.S. law.
- Issuer Risk: A stablecoin’s value depends on the issuer’s ability to maintain the peg and honor redemptions. This introduces counterparty risk, which violates the “insignificant risk” criterion for cash equivalents.
- Not Demand Deposits: Stablecoins are typically held in digital wallets, not in bank accounts or demand deposit accounts. This means they are not immediately accessible in the same way as traditional cash.
Since the cash and cash equivalents classification is likely not met, stablecoins could be considered financial assets. The core of the Accounting Standards Codification (ASC) 820-10-20 definition of financial assets lies with the assertion of rights and obligations. As such, the primary consideration of redemptive rights and control is critical in evaluating the accounting treatment of stablecoins. One of the primary reasons regulators are hesitant to ascribe the definition of a financial asset to stablecoins is due to the diverse form in which stablecoins can take shape.
Stablecoin holders should review the terms and conditions of the stablecoin they hold and consider the following:
- Legally Enforceable Redemption Rights: The enforceability of redemption rights on the issuer is pivotal in determining whether a stablecoin is a financial asset or intangible asset.
- Collateralization: The existence, quality, quantity, and nature of assets that back the stablecoin.
- Contractual Terms & Conditions: Understanding the contractual rights and claims through the terms and conditions and what laws and regulations may impact the transferability and liquidity concerns.
Accounting Considerations for Fiat-Backed Stablecoins
Fiat-backed stablecoins are digital assets typically pegged to a fiat currency, such as the U.S. dollar, and are often redeemable on a one-to-one basis. The key factor in determining the appropriate accounting treatment for a stablecoin held by an entity is whether the holder has a contractual and enforceable right to redeem the stablecoin for cash, at par, from the issuer.
If such a redemption right exists and is legally enforceable, the stablecoin may qualify as a financial asset under U.S. GAAP. At this point, the holder must evaluate the nature of the financial asset to determine its classification under the relevant accounting guidance. See the “Intangible Asset” section below if such a redemption right does not exist.
- Receivable (ASC 310): If the stablecoin represents a contractual right to receive cash from the issuer upon demand, and there are no other features such as interest or maturity, it is typically most appropriately classified as a receivable. This is the most common scenario for fiat-backed stablecoins, where the issuer is obligated to return fiat currency upon request.
- Debt Security (ASC 320): If the stablecoin includes features such as a fixed maturity date, interest payments, or other characteristics typical of debt instruments, it may be classified as a debt security. This is less common but could apply in cases where the stablecoin is structured more like a tokenized bond.
- Equity Security (ASC 321): If the stablecoin conveys ownership interest or residual claims in the issuer’s net assets, it may be considered an equity security. This is rare for fiat-backed stablecoins, but relevant if the token represents a share in a pooled investment or corporate entity.
Once the classification is determined, the initial measurement typically follows ASC 310-10-30, which requires recognition at cost.
For subsequent measurement, the accounting depends on the classification and the entity’s intent:
- If classified as a receivable, it may be measured at amortized cost under ASC 310-10-35, unless the entity elects the fair value option under ASC 825-10-25-1, in which case changes in fair value are recognized in net income.
- If classified as a debt or equity security, the guidance under ASC 320 or ASC 321 would apply, respectively, including considerations for trading, available-for-sale, or held-to-maturity designations.
Application Decision Tree
- Does the holder have a contractual right to redeem for cash?
- No → May not be a financial asset; see “Intangible Asset” section below.
- Yes → Proceed to classification.
- Classification: Does the stablecoin resemble a receivable, debt, or equity?
- Receivable → ASC 310
- Debt Security → ASC 320
- Equity Security → ASC 321
- What method for initial and subsequent measurement?
- Initial → Cost (ASC 310-10-30)
- Subsequent → Amortized cost (ASC 310-10-35) or fair value (ASC 320-10-35 and 321-10-35, or for election 825-10-35-1)
*The details above do not consider broker-dealer entities, which report under ASC 940 and may hold their own “inventory” for the purpose of market-making activities and proprietary positions.
Intangible Asset
If the holder does not have a contractual right to redeem the stablecoin for cash, redemption is not enforceable, and the stablecoin would likely be classified as an intangible asset under ASC 350-30, subject to impairment testing but not fair value measurement.
Accounting Standards Update (ASU) 2023-08, Intangibles—Goodwill and Other—Crypto Assets, Subtopic 350-60, allows qualifying digital assets to be measured at fair value with changes recognized in net income. The qualifying criteria according to ASC 350-60-15-1 include:
- Fungible: Must be interchangeable with other units of the same type, e.g., bitcoin or Ethereum (ETH), not non-fungible tokens (NFTs).
- Not issued or created by the reporting entity or its affiliates.
- Exist on a distributed ledger and secured by cryptography, e.g., blockchain.
- Do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets.
Conclusion
Due to the absence of comprehensive regulatory guidance, there are multiple pathways to consider when accounting for stablecoins, including requiring a foundational understanding of related technologies, intended use, and contractual rights. The classification of stablecoins under U.S. GAAP lies within the specific rights and obligations embedded in each stablecoin token.
Key Takeaways
- Given the unique facts and circumstances of each stablecoin, a comprehensive analysis of legally enforceable rights and obligations conveyed through ownership is essential to proper accounting.
- Stablecoins may be categorized as financial assets, intangible assets, or possibly even equity or debt, contingent upon redeemability, collateralization, and contract structure.
- Determining if the stablecoin qualifies as a financial asset that provides a contractual right to receive cash or another financial instrument is the first step to proper classification.
- If not determined to be a financial asset, the stablecoins may fall under ASC 350 and be an intangible asset.
Whether you are preparing to issue or hold stablecoins, Forvis Mazars provides an Unmatched Client Experience® to help you evaluate digital asset accounting so you can lead and report with confidence in an emerging ecosystem. Forvis Mazars has extensive accounting and blockchain experience to help you navigate the complexities associated with accounting for stablecoins.
If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.