Stablecoin compliance could determine which issuers win institutional adoption as new US accounting and regulatory rules raise standards for redemption, reserves and risk controls, according to Aquanow CEO Phil Sham.
The Financial Accounting Standards Board issued a proposal on Aug. 18 that would clarify how the existing definition of cash equivalents applies to certain digital assets, including some stablecoins.
The proposal does not classify every stablecoin as cash. Instead, it focuses on qualifying assets with characteristics such as price stability, liquid reserves, and contractual rights allowing holders to redeem directly with the issuer for cash on demand.
FASB’s proposal arrived one day after the US Treasury requested public comments on rules for implementing Section 3 of the $GENIUS Act. Together, the two measures could reduce accounting uncertainty while raising the compliance threshold for issuers seeking institutional adoption in the US.
Phil Sham, CEO and co-founder of digital asset infrastructure provider Aquanow, told crypto.news that accounting recognition could remove a meaningful barrier for financial institutions. However, he said it would not automatically make stablecoins equivalent to bank deposits or other traditional cash holdings across every part of an institution.
Stablecoin accounting could remove treasury friction
Classifying qualifying stablecoins as cash equivalents could make them easier for companies to use in treasury management, payments, and settlement. The change may also affect how firms present digital assets on their balance sheets and assess their available liquidity.
Sham said the proposal could make it easier to add eligible stablecoins to existing financial workflows.
“If adopted, the proposal could remove meaningful accounting friction and make qualifying stablecoins easier to integrate into treasury and settlement workflows.”
Accounting treatment would only address one part of the institutional approval process. Banks, investment firms, and corporations would still need to consider regulatory capital rules, internal risk limits, collateral standards, and contractual obligations.
Many bond agreements and credit facilities have their own definitions of cash and cash equivalents. Even if a stablecoin meets the FASB standard, a borrower may need lender approval before using the asset to meet a liquidity covenant or minimum-cash requirement.
Institutions would also need to evaluate custody, issuer exposure, secondary-market liquidity, and their ability to redeem during periods of market stress.
“Firms would also require confidence in redemption, custody, issuer exposure, operational controls and liquidity under stress,” Sham said. “It could accelerate adoption, but not replace traditional cash holdings overnight.”
The distinction means a favorable accounting standard could support stablecoin use without resolving every legal, credit, and operational concern attached to the asset.
Redemption rights may matter more than the token
FASB’s focus on direct, on-demand redemption could also produce different accounting outcomes for institutions holding the same stablecoin.
Stablecoins are generally fungible on-chain, meaning one unit of a token is designed to be interchangeable with another. However, the legal rights attached to those units may depend on whether the holder bought them directly from the issuer, holds them through a custodian, or has exposure through an exchange account.
An institution holding a stablecoin through an exchange may have a contractual claim against the platform rather than the issuer. According to Sham, that additional counterparty exposure could prevent the asset from meeting the proposed cash-equivalent criteria.
“The same stablecoin could be fungible on-chain but treated differently depending on the holder’s contractual rights.”
A bankruptcy-remote trust or custodial arrangement could produce another outcome if it legally passes direct redemption rights to the beneficial owner. Sham said the result would depend on the final accounting standard, the institution’s documentation and the terms of the arrangement.
The proposal could therefore influence how institutional stablecoin products are structured. Exchanges and custodians may face pressure to show that customers retain enforceable redemption rights rather than only a claim against an intermediary.
“Accounting eligibility may therefore depend as much on how the stablecoin is held as on the asset itself,” Sham said.
$GENIUS Act rules raise the compliance threshold
The $GENIUS Act adds a separate regulatory test for issuers seeking access to US customers.
Under Treasury’s proposed implementation framework, a person generally would not be permitted to issue a payment stablecoin in the US after Jan. 18, 2027, without an appropriate federal or state license.
The law also places conditions on foreign-issued stablecoins offered in the country. Foreign issuers would need the technical ability to follow lawful US orders and comply with applicable arrangements between the US and their home jurisdictions.
A further restriction is due to begin on July 18, 2028. Digital asset service providers generally would no longer be permitted to offer payment stablecoins to US customers unless a licensed issuer issued them.
For institutions choosing among eligible stablecoins, Sham said formal authorization will be only the starting point. Firms will examine the issuer’s redemption terms, the quality and concentration of its reserves, asset segregation and independent reporting.
They are also likely to study what happens if the issuer or one of its reserve banks fails.
“Institutions ask three practical questions: who owes us the dollar, where is it held, and how quickly can we recover it under stress?”
Sham said a 1:1 reserve claim would not be enough by itself. Institutional users would want evidence that they can consistently redeem at par, including when liquidity conditions deteriorate.
Governance, cybersecurity, business continuity, anti-money laundering procedures and sanctions controls could also affect an issuer’s ability to win institutional business.
Compliance could concentrate stablecoin liquidity
The combined accounting and licensing requirements could direct more activity toward a limited group of issuers with established banking relationships, distribution channels, and compliance teams.
Large issuers can spread regulatory and operational costs across a wider user base. They also benefit from existing exchange integrations and deeper liquidity, making their stablecoins easier to use for trading, settlement and collateral.
Sham said those advantages could make it harder for newer issuers to attract enough liquidity to compete.
“Liquidity may concentrate among established issuers because compliance costs, distribution and network effects favour scale. That will make it harder, but not impossible, for newer players to compete.”
Smaller issuers could still build a market by targeting regional payment needs, industry-specific settlements, or markets underserved by the largest dollar-backed tokens. Lower costs alone may not be enough if users cannot reliably redeem the token or if intermediaries cannot offer it in the US.
A smaller issuer would need sound regulatory foundations, clear redemption terms and an ecosystem prepared to support the asset, according to Sham.
“Compliance earns the right to compete; utility and ecosystem readiness drive usage,” he said.
FASB’s proposal and the $GENIUS Act framework remain subject to their respective rulemaking processes. Treasury said comments on its proposed rule should be submitted within 60 days of publication in the Federal Register.
If the rules take effect largely as proposed, stablecoin competition could shift from a race based mainly on supply, yield and exchange availability toward one shaped by legal claims, reserve access and the ability to return dollars during a crisis.
