FASB Proposal Unlocks Stablecoin Potential

Circle's co-founder Jeremy Allaire has described the new accounting proposal from the U.S. Financial Accounting Standards Board (FASB) as an 'enormous strategic unlock' for stablecoins like USDC.

The proposal, announced on August 18, would allow financial institutions and corporations to classify certain stablecoins as cash equivalents, making it easier for companies to hold tokens.

Allaire gave the proposal a nine out of ten, linking it to the $GENIUS Act, which he believes will pave the way for wider usage of USDC. He stated that the new accounting change would allow tokens considered cash equivalents to be used in financial transactions without penalties.

The FASB proposed three tests for stablecoins to meet before being considered a cash equivalent: on-demand contractual right to redemption, direct redemption with the issuer for an amount of cash known, and segregated reserves worth at least one dollar of short-term, very liquid assets per token in circulation.