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Can Fiat‐backed Stablecoins Be Considered Cash or Cash Equivalents Under International Financial Reporting Standards Rules?

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  • Filip Hampl
  • Lucie Gyönyörová

Abstract

Stablecoins are a rapidly evolving subcategory of cryptocurrency that aim to reduce the price fluctuations of traditional cryptocurrencies and thus become a common digital payment instrument. This paper aims to assess the material substance of fiat‐backed stablecoins to determine whether fiat‐backed stablecoins could be considered, in accordance with IFRS, as cash or cash equivalents. We chose 11 fiat‐backed stablecoins representing 99.97% of the total market capitalisation of all fiat‐backed stablecoins. Using a three‐step approach, we performed an analysis of the legal and general terms and conditions of the selected stablecoins and of cryptocurrency exchanges, and quantitatively analysed their risk characteristics in comparison with fiat currency pairs, money market indexes and instruments, and traditional cryptocurrencies. The results show that nine of the 11 stablecoins met the objective requirements of cash equivalents according to their material substance and, using an extensive interpretation of IAS 7, could be reported as cash equivalents. This study enhances understanding of the material substance of fiat‐backed stablecoins for their financial reporting and can be used by entities when creating accounting policies under existing IFRS rules and by accounting standard setters as evidence when formulating new rules or officially interpreting existing ones to provide guidance on the financial reporting of fiat‐backed stablecoins.

Suggested Citation

  • Filip Hampl & Lucie Gyönyörová, 2021. "Can Fiat‐backed Stablecoins Be Considered Cash or Cash Equivalents Under International Financial Reporting Standards Rules?," Australian Accounting Review, CPA Australia, vol. 31(3), pages 233-255, September.
    • Handle: RePEc:bla:ausact:v:31:y:2021:i:3:p:233-255
    DOI: 10.1111/auar.12344
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    1. Barry Eichengreen & Ganesh Viswanath-Natraj, 2022. "Stablecoins and Central Bank Digital Currencies: Policy and Regulatory Challenges," Asian Economic Papers, MIT Press, vol. 21(1), pages 29-46, Winter/Sp.
    2. Michael Bradbury & Bryan Howieson, 2021. "Editorial," Australian Accounting Review, CPA Australia, vol. 31(3), pages 167-168, September.
    3. Voicu D. Dragomir & Valentin Florentin Dumitru, 2023. "Recognition and Measurement of Crypto-Assets from the Perspective of Retail Holders," FinTech, MDPI, vol. 2(3), pages 1-17, August.
    4. Ahmed, Mohamed Shaker & El-Masry, Ahmed A. & Al-Maghyereh, Aktham I. & Kumar, Satish, 2024. "Cryptocurrency volatility: A review, synthesis, and research agenda," Research in International Business and Finance, Elsevier, vol. 71(C).

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