FASB Stablecoin Proposal Seen as Game-Changer by Circle Co-Founder

Circle's Jeremy Allaire has hailed the US Financial Accounting Standards Board (FASB) stablecoin proposal as an 'enormous strategic unlock' for USDC, a major stablecoin issued by his company. The proposal would allow financial institutions and corporations to classify appropriate stablecoins as cash equivalents.

Allaire's comment came just three days after the FASB released its proposed Accounting Standards Update, which adds guidance to Topic 230 on the statement of cash flows but does not change the definition of a cash equivalent. The proposal also requires companies that report cash equivalents to disclose their major components each year.

The FASB has outlined three tests for stablecoins to be considered cash equivalents: holders must have an on-demand contractual right to redeem tokens, redemption must be directly with the issuer for a known amount of cash, and issuers must keep segregated reserves worth at least one dollar in short-term, very liquid assets per token in circulation.

While some are optimistic about the proposal's potential impact, others have expressed skepticism. An accounting professor at Hofstra University, Jack Castonguay, believes that allowing stablecoins to sit under cash is a step too far. The FASB has set a comment deadline of November 19, after which it will finalize its decision.