Publication details

Can Fiat-backed Stablecoins Be Considered Cash or Cash Equivalents under International Financial Reporting Standards Rules? (IN PRINT)

Authors

HAMPL Filip GYÖNYÖROVÁ Lucie

Year of publication 2021
Type Article in Periodical
Magazine / Source Australian Accounting Review
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web https://onlinelibrary.wiley.com/doi/full/10.1111/auar.12344
Doi http://dx.doi.org/10.1111/auar.12344
Keywords analysis of distribution; cryptocurrencies; financial reporting; international accounting; value at risk; volatility
Description 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.
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