ICAEW: How Will Stablecoins Be Accounted For, Taxed, and Assured?
The Institute of Chartered Accountants in England and Wales published a substantive analysis on 13 August 2026 identifying three interconnected gaps that sit at the heart of stablecoin adoption: the absence of a dedicated accounting standard, unresolved tax classification, and assurance frameworks that trail behind the technology. For accounting firms, auditors, and CFOs already working with stablecoins, those gaps are not theoretical. They are live risks sitting on the balance sheet right now.
Why Stablecoins Create a Distinct Accounting Problem
Stablecoins are commonly described as a bridge between traditional finance and on-chain activity. Their defining feature is a peg, usually to a fiat currency, backed by reserves that might include cash, short-dated government debt, or other instruments. That peg is exactly what makes standard-setting so difficult.
The classification question under IFRS
Under current IFRS, there is no standard written specifically for crypto assets. Practitioners have been forced to reason by analogy. IAS 38 (intangible assets) has been the default landing spot for many crypto holdings, but its cost model sits awkwardly with an asset whose whole point is price stability and near-cash liquidity. IAS 7 and IFRS 9 offer partial alternatives for certain instruments, but neither maps cleanly onto a fiat-pegged token held as a treasury instrument or used to settle commercial transactions.
The IASB acknowledged as much when it added a narrow-scope amendment to IAS 38 in 2019 permitting a revaluation model for crypto assets traded in active markets. That amendment helped for volatile assets like bitcoin, but stablecoins sit in a different category: they are designed not to move in price, which raises the question of whether fair value measurement even adds information. The ICAEW analysis surfaces this tension directly.
US GAAP: ASC 350-60 and its limits
In the United States, the FASB's ASC 350-60 standard, which took effect for fiscal years beginning after 15 December 2024, requires fair value measurement of certain crypto assets with gains and losses recognised in net income each period. That was a significant step forward for bitcoin and ether held on corporate balance sheets. Stablecoins, however, expose a gap: if an asset is designed to maintain a one-to-one peg, mandatory fair value measurement produces near-zero volatility in P&L but imposes significant operational cost to price and disclose it each reporting period. The ICAEW piece implicitly raises the question of whether stablecoins should be carved out or treated differently, a debate that neither the FASB nor the IASB has fully resolved.
Tax Treatment: Why Classification Drives Everything
ICAEW's analysis gives particular attention to tax, and with good reason. In the UK, HMRC has published guidance on the taxation of crypto assets, but that guidance was written primarily with exchange tokens like bitcoin in mind. Stablecoins complicate the picture in at least two directions.
Are stablecoins exchange tokens or something else?
HMRC's taxonomy distinguishes between exchange tokens, security tokens, and utility tokens. A fiat-backed stablecoin does not fit neatly into any of those boxes. If HMRC treats it as an exchange token, disposals trigger capital gains tax in the normal way, even if the economic gain is negligible due to the peg. If the coin exhibits characteristics of a debt instrument or e-money, different rules may apply. The ICAEW flags this ambiguity as a practical problem: firms using stablecoins routinely for treasury or payments may be generating taxable disposal events on every conversion, potentially triggering a compliance burden that was never anticipated when the transactions were structured.
Corporate treasury and the loan relationship rules
For UK companies, the loan relationship rules under CTA 2009 govern how most debt instruments are taxed. Whether a stablecoin could fall within those rules depends on whether it is characterised as representing a money debt. If it does, the tax treatment shifts significantly: gains and losses would be taxed on a money's-worth basis as they arise, not just on disposal. This is an open question. ICAEW notes that the boundaries here have not been formally settled by HMRC, leaving firms to make judgment calls that carry real audit risk.
VAT and the treatment of stablecoin transactions
The VAT position adds another layer of complexity. HMRC has generally treated the exchange of crypto assets as exempt from VAT on the basis that they function as a means of payment, but the scope of that exemption has not been tested comprehensively for all stablecoin types. Algorithmic stablecoins or those backed by non-fiat collateral may not qualify for the same treatment. Firms processing high volumes of stablecoin transactions need documented positions on VAT, not informal assumptions.
Assurance: Auditing What You Cannot Physically Inspect
The third strand of the ICAEW analysis concerns how auditors provide assurance over stablecoin holdings and the reserves that back them. This is a problem that has no clean answer under existing auditing standards.
Reserve verification and the on-chain evidence question
A stablecoin issuer's reserve assets are the foundation of the peg. For an auditor providing assurance over those reserves, the challenge is multi-layered. On-chain balances can be verified using blockchain explorers, but that tells you only what the ledger shows at a point in time, not whether the assets are unencumbered, whether the issuer has pledged them elsewhere, or whether the off-chain components of the reserve (such as commercial paper or repo agreements) are accurately described. Standard confirmation procedures designed for bank accounts do not transfer directly to on-chain verification.
For an overview of how a major stablecoin issuer has approached this challenge in practice, the analysis of Tether's KPMG audit and what it means for stablecoin accounting provides useful context on the evidentiary questions auditors are already confronting.
ISA compliance and the limits of existing standards
International Standards on Auditing were not designed with blockchain assets in mind. The IAASB has been developing supplementary guidance on auditing crypto assets, but as of mid-2026 comprehensive standards specific to stablecoin reserves remain in development. ICAEW's analysis signals that audit firms working in this space are currently relying on adaptations of existing ISAs combined with firm-specific methodologies, a situation that introduces variability in assurance quality across the market and potential gaps in comparability for users of audited financial statements.
Proof-of-reserves and its limitations
Proof-of-reserves reports, often produced using Merkle tree techniques, have become a common response to calls for transparency from stablecoin issuers. ICAEW's analysis implicitly signals caution: a proof-of-reserves report is not an audit. It confirms that assets exist on-chain at a moment in time, but it does not verify liabilities, off-chain obligations, or the quality of the reserve assets. Accounting firms advising clients who rely on stablecoin issuers carrying only proof-of-reserves attestations should be explicit with those clients about what is and is not covered.
Practical Implications for Accounting Firms and CFOs
The ICAEW piece is a reminder that the accounting profession is operating ahead of the standards in this space. That creates both risk and responsibility.
Balance sheet classification decisions cannot wait
Every firm holding stablecoins needs a documented classification rationale today, before a finalised standard arrives. Whether you classify a USD-pegged token as a financial asset, an intangible, or cash equivalent will determine how it is measured, how gains and losses flow through the P&L or OCI, and what disclosures are required. That decision should be made by reference to the substance of the arrangement, not by default to the easiest option. It should also be revisited whenever the stablecoin's reserve composition or redemption terms change.
The emergence of new stablecoin instruments, such as those described in the coverage of Standard Chartered's HKDAP stablecoin beta and its accounting implications, illustrates how quickly product design is evolving in ways that existing classification frameworks struggle to track.
Tax position documentation is a priority
Given the open questions on UK tax classification, firms and their clients should prepare and retain written tax position papers covering each stablecoin type used. Those papers should address: the token's likely HMRC category, whether each conversion or payment constitutes a taxable disposal, the VAT treatment of transactions, and whether the loan relationship rules could apply for corporate holders. Waiting for HMRC to publish definitive guidance before preparing these positions is a higher-risk strategy than documenting a defensible position now.
Audit methodology needs a stablecoin-specific layer
Audit teams need written procedures for verifying stablecoin balances that go beyond standard bank confirmation. That means combining on-chain verification with confirmation of off-chain reserve components, reviewing the terms under which reserves are held, and understanding redemption risk. Where a client holds stablecoins as a significant balance sheet item, the audit committee should receive explicit communication about the limitations of current assurance methodologies and what additional procedures have been performed to address them.
The Regulatory Horizon
In the UK, the Financial Services and Markets Act 2023 gave the FCA and the Bank of England powers to regulate stablecoin issuers and systemic stablecoin arrangements. The FCA's detailed rules for fiat-backed stablecoin issuers are expected to take effect during 2025 and 2026. Those rules will impose requirements on reserve quality, redemption rights, and disclosures that will directly affect how issuers are audited and how their financial statements are prepared.
Globally, the FSB has published high-level recommendations for the regulation of global stablecoin arrangements, and jurisdictions including the EU (through MiCA's e-money token provisions) and the US (through ongoing Congressional debate over the GENIUS Act and related bills) are at various stages of legislating reserve and disclosure requirements. Each of those frameworks carries accounting and audit implications that firms should be mapping now, not when the rules land.
For a broader view of how compliance obligations are evolving across the digital asset space, the crypto compliance and reporting hub tracks the key developments firms need to monitor.
Source: ICAEW
Frequently Asked Questions
Which IFRS standard currently applies to stablecoins?
There is no IFRS standard written specifically for stablecoins. Most preparers apply IAS 38 (intangible assets) by analogy, though some stablecoins may meet the criteria for IFRS 9 financial instruments depending on their contractual terms. The IASB has not yet issued a dedicated standard for crypto assets, so classification remains a matter of professional judgment and disclosure of that judgment in the notes.
Does FASB ASC 350-60 cover stablecoins?
ASC 350-60 requires fair value measurement for crypto assets that meet its scope criteria. Stablecoins that are fungible, do not provide enforceable rights to the holder, and are traded on active markets may fall within scope. Because the peg means fair value changes are minimal, the operational burden of applying the standard may outweigh its informational benefit, a tension the FASB has not yet addressed with a specific carve-out.
How does HMRC classify stablecoins for UK tax purposes?
HMRC's published guidance classifies crypto assets into exchange tokens, security tokens, and utility tokens, but does not specifically address fiat-backed stablecoins. Depending on their characteristics, a stablecoin could be treated as an exchange token (subject to CGT on disposal), a financial instrument potentially within the loan relationship rules for companies, or possibly as e-money. Firms should prepare documented tax positions for each coin type rather than assuming a single classification applies across all stablecoins.
What are the limitations of a proof-of-reserves report for audit purposes?
A proof-of-reserves report, typically using Merkle tree cryptography, confirms that identified on-chain assets exist at a point in time. It does not constitute an audit. It does not verify the issuer's liabilities, off-chain reserve assets such as government bonds or commercial paper, whether assets are pledged or encumbered, or whether the reserve is sufficient to meet redemptions under stressed conditions. Auditors providing assurance over stablecoin issuers need to address all of these dimensions through separate procedures.
When should a CFO escalate stablecoin accounting to the audit committee?
Any stablecoin balance that is material to the balance sheet, or any stablecoin activity that generates a significant volume of transactions, warrants explicit audit committee communication. The committee should understand the classification rationale, the tax position, and the audit procedures applied, including their limitations. This is particularly important before the year-end close, so that the auditor and management are aligned on the accounting treatment before fieldwork begins.