Is USDC a cash equivalent under US GAAP?

Under US GAAP as it stands today, most companies cannot classify USDC as a cash equivalent. The definition in ASC 305-10-20 was written for short-term investments with a maturity, and a stablecoin has no maturity date. That is the whole problem in one sentence.

That is also about to change. On 18 August 2026 the FASB issued a proposed Accounting Standards Update, Cash Equivalents—Disclosure Enhancement and Evaluation of Certain Digital Assets, which would add illustrative examples showing how the existing cash equivalents definition applies to digital assets. Comments are due 19 November 2026. If you hold USDC on your balance sheet, the comment period is open while you are reading this.

This article covers what the current rules actually say, why stablecoins fell through the gap, what the proposal would change, and what a finance team should do in the meantime.

What does ASC 305 require for a cash equivalent?

ASC 305-10-20 defines cash equivalents as 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. In practice, auditors read that as a three-part test: the item is an investment, it converts to a known amount of cash, and it has an original maturity of three months or less.

USDC passes the second condition comfortably. One USDC redeems for one dollar, and Circle processes redemptions directly. It is the first and third conditions that cause the argument.

A stablecoin is not obviously an investment in the sense the standard contemplated, and more importantly it has no contractual maturity at all. A Treasury bill matures. A money market fund has an underlying portfolio with a weighted average maturity. USDC simply exists until you redeem it. There is no date on which it becomes cash by itself.

Because the definition is built around proximity to maturity, an instrument with no maturity does not fit the shape of the test, even when it is economically more liquid than the things that do pass. That is the gap.

Why doesn't ASU 2023-08 answer this?

This is the most common confusion we hear, and it is worth clearing up directly. ASU 2023-08 was the FASB's crypto standard, effective for fiscal years beginning after 15 December 2024. It introduced Subtopic 350-60 and required fair value measurement through net income for crypto assets in scope. Many finance teams assume it settled stablecoin accounting. It did not. It explicitly excluded them.

ASC 350-60-15-1 sets six criteria an asset must meet to fall inside the standard. The asset must meet the definition of an intangible asset, be created on a distributed ledger, be secured by cryptography, be fungible, not be created or issued by the reporting entity or its related parties, and, critically, the holder must not have enforceable rights to or claims on underlying goods, services, or other assets.

That last criterion is where fiat-backed stablecoins fail. Holding USDC gives you a contractual right to redeem for a dollar of Circle's reserves. That redemption right is the entire point of a stablecoin, and it is precisely what pushes the holding out of Subtopic 350-60.

So bitcoin and ether are in scope and carried at fair value. USDC is out of scope, and the standard offers no replacement answer. Companies were left to reason from first principles.

Where do companies actually put USDC today?

With no specific guidance, practice has split three ways, and all three appear in filed financial statements.

Some companies treat the holding as a financial asset or receivable under ASC 310, on the theory that what you hold is a claim on the issuer for a fixed amount of cash. This maps well to the economics of a fully reserved, redeemable token.

Some treat it as an indefinite-lived intangible asset under ASC 350-30, which is where crypto sat before ASU 2023-08. This is the most conservative reading and the least representative of the economics, because it brings impairment testing to an asset that is pegged to a dollar.

Some classify it as a cash equivalent under ASC 305, arguing that substance beats the maturity technicality because redemption is on demand and effectively instant. Coinbase moved USDC into cash and cash equivalents on this reasoning, stating that the classification better reflects its economic substance and the manner in which it is used.

If you are choosing today, the honest answer is that all three are defensible and your auditor's view is the one that governs. What matters more than the choice is that you document the reasoning, apply it consistently, and disclose it.

What would the August 2026 proposal change?

The proposed ASU does two things. It would require all entities to disclose the significant components and amounts of cash equivalents annually, and it would add illustrative examples clarifying how the existing cash equivalents definition applies to certain digital assets.

The second part is what matters for stablecoin holders. Under the proposal, a digital asset would need specific attributes to qualify:

• A contractual on-demand redemption right, so the holder can convert at their election rather than waiting for a maturity date
• Direct redemption with the issuer for a known amount of cash
• Segregated reserve assets held by the issuer on at least a one-to-one basis in short-term, highly liquid assets

Read those together and you can see the drafting logic. Rather than rewrite the maturity condition, the FASB is saying that an enforceable on-demand redemption right against segregated reserves does the same work that proximity to maturity does: it makes conversion to a known amount of cash certain and immediate.

The criteria are issuer-specific, not token-generic. Whether a given stablecoin qualifies turns on its actual redemption terms and reserve structure, which is why commentators have questioned whether every major stablecoin would clear the bar. If you hold more than one, you may end up with different classifications for different tokens, and you should expect your auditor to ask about reserve composition and redemption mechanics rather than accept the token's name as the answer.

The effective date has not been set. The FASB will determine it after considering stakeholder feedback.

What should a finance team do before November 19?

Four things, in order.

Document your current position. Whatever classification you are using, write down the reasoning against the ASC 305 definition and the ASC 350-60 scope criteria. If you have never put it in writing, you will be doing it under time pressure during the audit instead.

Check your stablecoins against the proposed attributes. On-demand redemption, direct issuer redemption, segregated one-to-one reserves in short-term liquid assets. Circle publishes reserve composition and attestations; so does Tether, on a different schedule and with a different asset mix. The differences between issuers matter more under the proposal than they do today, and our USDC vs USDT comparison walks through where they diverge.

Talk to your auditor now, not in Q1. If a reclassification is coming, the question of whether it is a change in accounting principle and what that means for comparatives is better answered early.

Consider commenting. The comment period is open until 19 November 2026 and the FASB reads letters from operating companies, not just from the Big Four. If you hold stablecoins for working capital, you have standing to say so.

How this affects day-to-day operations

Classification is a reporting question, but it has operational consequences. If stablecoin balances sit in cash and cash equivalents, they appear in the cash line that your board, lenders and covenants look at. If they sit in intangibles, the same economic dollars disappear from the cash position and may drag impairment testing behind them.

That argues for keeping the underlying records clean regardless of where the balance lands. Every stablecoin movement should carry the same audit trail as a wire: counterparty, purpose, invoice reference, timestamp and settled amount. On Plaitr, fiat and stablecoin balances sit in one account and every transaction posts to the ledger as it settles, so the reconciliation does not depend on which classification you land on. See auto accounting for how the records follow the movement, and how to record stablecoin transactions in QuickBooks and Xero for the export side.

FAQ

Is USDC a cash equivalent under US GAAP?

Under current US GAAP, usually not. ASC 305-10-20 defines cash equivalents around an original maturity of three months or less, and USDC has no contractual maturity. Some companies classify it as a cash equivalent anyway on an economic substance argument, and Coinbase has done so publicly, but there is no authoritative guidance confirming the treatment. A FASB proposal issued on 18 August 2026 would add illustrative examples permitting qualifying digital assets to be classified as cash equivalents. It is not final and the comment period closes 19 November 2026.

Does ASU 2023-08 apply to stablecoins?

No. ASU 2023-08 created Subtopic 350-60 and requires fair value measurement for crypto assets in scope, but ASC 350-60-15-1 excludes assets where the holder has enforceable rights to or claims on underlying assets. A fiat-backed stablecoin gives the holder a redemption right against the issuer's reserves, so it falls outside the standard. Bitcoin and ether are in scope; USDC and USDT are not.

What are the three attributes in the FASB's 2026 proposal?

A contractual on-demand cash redemption right, a direct redemption right with the issuer for a known amount of cash, and segregated reserve assets held by the issuer on at least a one-to-one basis in short-term, highly liquid assets. All three would need to be present for a digital asset to be evaluated as a cash equivalent under the proposed illustrative examples.

Can two companies classify USDC differently and both be right?

Yes, under current GAAP. In the absence of specific guidance, companies reason from the general definitions, and financial asset, intangible asset and cash equivalent treatments have all appeared in filed statements. What auditors look for is a documented rationale applied consistently and disclosed, not a particular answer.

When would the new guidance take effect?

The FASB has not set an effective date. It will decide after reviewing comments, which are due 19 November 2026. Expect a final ASU and a transition period after that, so this is a 2027 question at the earliest for most filers.

What should you do next?

If your treasury holds stablecoins, write down your classification rationale this quarter and test your holdings against the three proposed attributes. The accounting answer is moving, and the companies that will handle the transition cleanly are the ones whose transaction records already support either outcome.

Plaitr holds fiat and stablecoin balances in one self-custodial account with reconciliation built into the movement rather than bolted on afterwards. See stablecoins as a rail for how that works underneath, or talk to us about your corridor.

This article describes accounting standards and is not accounting advice. Your auditor's judgment governs your financial statements.