Holding USDC on an Exchange May Not Count as Cash Under Proposed US Rules

The US Financial Accounting Standards Board (FASB), which sets the rules American companies must follow in their accounts, published an exposure draft on 18 Aug setting out when a stablecoin qualifies as a cash equivalent. It is open for comment until 19 Nov and was approved unanimously by all seven board members.

Cash equivalents are the short-term, highly liquid holdings a company parks money in, currently including US Treasury bills, commercial paper and money market funds. Whether stablecoins belong there decides whether a corporate treasurer can hold one without an accounting penalty, and so whether they become an ordinary treasury instrument or stay as a curiosity finance departments have to explain.

The board refused to broaden the standard, rejecting both a rewrite of the definition and a new category for digital cash equivalents. It said the existing definition was intentionally narrow and that not all stablecoins would qualify. Instead, it added worked examples to show how the standard should be applied.

Three worked cases, two fail

In the qualifying case, an issuer holds reserves in a segregated account, at least one-to-one against tokens in circulation, in cash and US Treasury bills maturing within three months. The holder has an account with the issuer and a contractual right to redeem on demand at $1 per unit, with no significant fees or restrictions.

The first failure changes one fact. The holder has no account with the issuer and no right to redeem from it, but an active secondary market trades the token reliably at about $1. That does not qualify. Being able to sell is not the same as being able to redeem.

The second failure changes a different fact. Everything matches the qualifying case, except that reserves consist of crypto assets and gold, still segregated and still one-to-one. That fails, too, because those reserves can move in value for reasons unconnected to interest rates.

So, a token backed by gold or other crypto does not become cash however solid the redemption right, and a token with immaculate reserves does not become cash if the holder cannot reach the issuer.

The redemption trap catches most holders

The board considered whether redemption rights exercised through an intermediary might suffice and decided they do not. A chain of contracts may eventually reach the issuer's cash, but each link adds counterparty credit risk and makes conversion less direct and less certain.

The issuer's own filings show why that bites. Circle, the Boston-based issuer of USDC, describes redemption in its annual report as running one-for-one directly from the company for institutional customers of Circle Mint, its minting and redemption service, and for certain other end users where Circle acts as redeemer of last resort. Everyone else, it says, sells or exchanges in the secondary market.

That is close to the line FASB has drawn. A company with a Circle Mint account holds something resembling the qualifying case. A company holding the same token through an exchange or a broker looks more like the failing one, unless the redeemer-of-last-resort route amounts to the on-demand contractual right the board has in mind. The token is identical. The holding arrangement is not.

On reserves, USDC looks comfortable. Circle said that on 31 Dec 2025 it held about 88% of USDC reserves in a BlackRock-managed government money market fund available only to Circle, with the remainder as cash in accounts titled for the benefit of holders, mostly at global systemically important banks. Segregated cash and equivalents held for stablecoin holders stood at $75bn, against $44bn a year earlier.

One nuance the board added on reserves has been largely missed. An issuer holding excess reserves in other asset types is not automatically disqualified, but only short-term, highly liquid assets count toward the one-to-one threshold. Gold on top is survivable. Gold making up the numbers is not.

Coinbase reached the same test first

Coinbase, the largest US crypto exchange by trading volume, reclassified payment stablecoins as cash equivalents effective 31 Dec 2025, having previously treated them as receivables under ASC 310. The change was applied retrospectively.

Cash and cash equivalents on 31 Dec 2024 were restated from $8.5bn as previously reported to $9.3bn, an adjustment of $764mn. A separate USDC line worth $1.2bn disappeared, redistributed across cash equivalents, restricted cash and loan receivables. The change altered no totals: not assets, liabilities, equity, net income or earnings per share.

Its reasoning tracks the FASB test closely. Coinbase said USDC allows near-instant, one-to-one redemption for US dollars, and that the reserves behind it show the risk and liquidity characteristics of cash equivalents as defined in ASC 230, the same standard FASB is now amending. Deloitte, its auditor since 2020, flagged the change and issued an unqualified opinion.

Because Coinbase moved voluntarily rather than adopting a new rule, it had to demonstrate the treatment was preferable to the old one. Companies adopting once this is final will not have to.

The disclosure and the open question

Any company presenting assets as cash equivalents would have to disclose annually the significant components and amounts, with Treasury bills, commercial paper, stablecoins and money market funds given as examples. That applies regardless of how it holds digital assets and brings US practice closer to international standards without matching them.

The board went further in discussion, then pulled back. It considered requiring companies to name each significant stablecoin held and the amount and dropped the idea largely because making it work would have meant defining the word stablecoin, which it had already declined to do. It is now asking respondents whether it should do so after all. An answer of yes would mean investors seeing which specific tokens sit inside a reported cash pile.

The work lands in the same week as Treasury's proposed rules on who may issue and sell payment stablecoins and the US Securities and Exchange Commission's new crypto fundraising regime.

When this matters in practice 

Companies would apply the examples from the start of the annual period in which they adopt, rather than restating earlier years, and would show a reconciliation of opening cash balances before and after. Early adoption is permitted where accounts have not yet been issued. The board will set an effective date after reading the comment letters.

Presentation stays optional throughout. A company whose holdings qualify can still decline to present them as cash. What it will no longer be able to do is make that choice invisibly.