New reporting frameworks and regulations around stablecoins are coming thick and fast; in this episode, two experts from the AICPA, Di Krupica and Jeff Trent, discuss the new rules and what they mean for accountants and their clients.
Transcript:
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm editor-in-chief Dan Hood. There's been a lot of regulatory action around a particular kind of digital asset called stable coins over the past 12 months, which is big dues, whether you know what stable coins are or not. And that has some ramifications for accountants to bear in mind for themselves and their clients. Here to talk about all that. Our two experts in the area. First up is Di Krupica. She's a senior manager of assurance and advisory innovation for digital assets at the AICPA. Di, thanks for joining us.
Di Krupica (00:28):
Glad to be here and be part of this. Always happy to talk about digital assets.
Dan Hood (00:32):
Excellent. And we also have with us Jeff Trent. He's chair of the AIIPA's stablecoin controls work stream and a partner of the digital assurance and transparency practice at Big Four firm PwC. Jeff, thanks for joining us.
Jeff Trent (00:44):
Hello Dan. Thanks for having me.
Dan Hood (00:45):
Alright, let's dive in. I said for whether you know what stable coins are or not and I kind of have an idea what stablecoin, so I'm sort of uncomfortably in between those two groups of those who know and those who don't know bring me and everybody up to speed though. Jeff, maybe if you can take this, tell us what are stable coins exactly and how are they different from some other crypto assets that people may be more familiar with?
Jeff Trent (01:06):
Yeah, stable coins are a certain type of cryptocurrency that effectively are backed by an asset that is the most typical difference between IT and other crypto assets. So effectively it feels and looks to many people like a currency if you will. It's almost like exchanging a dollar. Now granted there are other type of stable coins that are backed by assets that are maybe not fiat currency, but what we'll be speaking about today with respect to what we've developed at the A SPA is really focused on those that are the backed stable coins.
Dan Hood (01:36):
Gotcha. Just again, for somebody who's not fully informed on these, what's the goal of having that backing behind it? Why not just use the dollars themselves?
Jeff Trent (01:48):
So it's really to enable circulation on the blockchain, right? So you effectively translate the dollars or would eventually become very liquid assets or investments into a digital currency so that you can transact it using digital wallets and that makes it move faster. Right. And it streamlines the entire process of exchanging money if you'll
Dan Hood (02:12):
Gotcha. Very cool. Alright. And like I mentioned, there's been a lot of regulatory and standard setting and frameworks being built around stable coins, I say recently, but really over the last year or so. Maybe you can tell us a little bit about that. Why are regulators and standard setters and framework builders focusing on stable coins?
Di Krupica (02:30):
I would say that that's a great question. Honestly, regulators have been focused, like you said, on stable coins for a while. It isn't something that suddenly appeared on their radar. We've been in conversations with legislative teams, with regulatory teams for years because it was clear early on that stable coins were going to potentially play this significant role in payments and financial markets at some. And that's why we did start developing resources years ago, forming the subgroups and work streams to explore technical issues and prepare practitioners for what was coming down the pipeline. So the attention you're seeing now at this moment, I would say is really a result of years of buildup as the stable coins and the regulators focused on this, they really wanted clear rules around who could use them, how they're backed, and what kind of transparency is required. And because we've been engaged in this space for such a long period of time, we were ready with the resources to help practitioners navigate the new requirements.
Dan Hood (03:41):
Alright, well let's talk a little bit about one particular element of those suspect. The genius Act that came out in August created a regulatory framework for stable coins diabetes. You can tell us a little bit about what are some of the main provisions of that? What do we, the top line things to know about that?
Di Krupica (03:55):
It's the first federal framework in the US specifically designed to regulate the payment stablecoin issuers. And it really sets the foundation on how these issuers operate going forward and how they will operate. And when we talk about payment stable coins, taking a step back, we're basically talking about a digital asset that's designed to be used for payments and settling transactions, right? They're meant to hold a steady value so that you can redeem one, you get this fixed amount of money back. They're really their own category specifically for a payment and stablecoin purposes settlement purposes. So after the Genus Act became law a i CPAs worked with a digital asset working group, which we developed this resource that's now posted on our website to help practitioners quickly understand which provisions matter most to them. Obviously if you open the law, it is huge. There's many pages to it and there's a lot of noise.
(05:06):
So we really wanted to develop this resource to highlight the key points of the law that's specific to the profession and walking through some of the key requirements just to give everyone a quick sense of what it actually does and what practitioners should be paying attention to. First you've got the ACT spelling out who is allowed to issue the payment. Stable coins, it's not a free for all, it's the issuers have to fall into specific categories. The act really narrows in on the field of entities that can meet regulatory expectations. And then next you have this dual framework, the federal and state oversight model, and this is a big one, one that is via creates this regulatory pathway, one at the federal level and one at the state level, but with some guide rails. For example, if a state qualified issuer grows beyond 10 billion in outstanding stable coins, they have to transition to the federal oversight or get this waiver.
(06:12):
So this dual system, but not at anything goes system. And then we get to the reserves themselves and the issuers have to maintain a strict one-to-one backing and those reserves have to be held in these high quality liquid assets. They have to be kept separate from operational funds. So no commingling, they can't be reheated, they can't be used in or reused in any way. So the ACT is really trying to make sure that if somebody wants to redeem their stable coin, their payment stable coin, the issuer actually has the asset sitting there to support that redemption. And then transparency is another major theme throughout the act. Issuers have to publicly disclose their redemption policies. They're required to publish monthly reports that show how many stable coins are outstanding and what reserves, what those reserves look like. That back, those stable coins. The report has to be examined by an accounting firm and this is where the practitioners come in performing the attestation engagements on those monthly reports.
(07:20):
In addition, CEOs and CFOs have to certify that it's accurate. So there's a strong emphasis on accountability here, and there's a strong emphasis on reliable information for larger issuers. Those with more than $50 billion of outstanding stable coins, there's an additional requirement to publish annual gap financial statements that are actually audited. And one thing that surprises people related to this act is the ACT prohibits the payment of interest and yield on the payment stable coins. That the way that I take a look at this and exploit it is that they're really meant to function as payment instruments not as investment products. And the last thing is the timing. I definitely wanted to highlight that the act is out there, the law is out there, but regulations haven't been set yet. And the act gives regulators one year to spell out specific rules that will make all of this operational, the law becomes effective. Either it's 18 months after an accident or 120 days after those final regulations come out. And there's a transition period in there to until July, 2028 for digital asset service providers that are offering stable coins that don't meet these new requirements. So those are the big pieces who can issue how they're overseeing and how the reserve works, what has to be disclosed and the timeline for the implementation. It's pretty significant shift in how these payment stable coins will be regulated going forward.
Dan Hood (09:01):
And I know for a lot of our audience, their ears perked up when you mentioned there's got to be, somebody's got to audit, somebody's got to look at that. So at some point, once these rules are clarified, they're going to be a little bit of an opportunity there for accountants to get in and work their magic on offering some assurance around all the reporting that's being done in this area. But maybe we talk a little bit about, I mentioned that the ICB has been looking at this a long time and playing a lot of role in it, and I know that last March they released a presentation disclosure framework for stablecoin reporting. Jeff, maybe you could tell us a little about some of the major features of that framework and how it was recently updated.
Jeff Trent (09:39):
Yeah, and it's a great segue actually from what you just mentioned, Dan, with respect to what Di covered earlier and in terms of the expectational requirement for that matter, for the stablecoin issuers to the audited. So the presentation and disclosure criteria that were published in March of 2025 are aligned to that monthly expectation that is established in the Genius Act and was previously established in existing state regulations that were existed for let's say a number of years depending on which state you look at. So the criteria at that point really looks at the monthly reporting that is required by the stablecoin issuer to disclose the tokens that they have that are in circulation and the reserve assets that back those tokens as diluted to it, that sort of required one-to-one backing. So it really covers the gamut of what do they have outstanding, how are they reserved to allow for the redemption of those assets? And then enough presentation of that information, sufficient presentation of that information in the report to show the reader what both sides of that look like, how they compare it to one another, that there is at least enough or potentially excess to cover the tokens of circulation. And it has some other requirements with respect to if there are things like blacklisted tokens or restricted tokens in some way to disclose that as well so that a reader gets a very clear transparency of exactly what all is out there.
Dan Hood (11:07):
Right. The more this ris, apart from the sort of obvious, right, there needs to be some auditing just in terms of setting this reporting up. I imagine there's opportunities for accountants. I imagine a lot of stablecoin issuers who are looking at this and going, wait, what does all this mean? Whereas this kind of reporting is sort of second nature for accountants, both in terms of setting up and then in terms of auditing it. So we could dive a little more into that, but for now we're going to take a quick break.
Alright. And we're talking with Di Krupica and Jeff Trent about the issuing requirements or the reporting requirements for stablecoin issuers. You both mentioned state and federal levels of regulation on this, and I was sort of curious, is that comment, it's not something I'm hugely aware of for a lot of investments, is that common in this or is there a reason why they have those two levels of reporting?
Jeff Trent (12:00):
So it's not entirely atypical, but in this particular case, because there wasn't a federal regulation that existed when some of the stable coins started to circulate and were operating in certain states, certain states stepped up and said to do business in my state, we're going to have expectations and requirements. And so there were in fact state regulations that existed prior to genius. They predate genius by somewhere between three and five years depending on what you look at. And they had established either similar or potentially even more stringent expectations and requirements of the stablecoin issuers that were registered in their state.
Dan Hood (12:38):
Gotcha. Alright. I think we also, I just wanted to clarify, I was not aware of, said that sort of divergence and regulatory or reporting requirements, I think we had talked about the original AICPA framework. There was a recent update to that. Is that correct?
Jeff Trent (12:53):
Yeah, that's right. So as we saw it in the working group, as we were developing the criteria, and again looking to actually existing standards that were out in the marketplace or regulations that were in the marketplace, which included state level, there was in addition to the monthly requirement and expectation of controls at the stablecoin issuer that effectively keep that balance of tokens of circulation, token operations, reserve management in balance over time because the monthly reporting is at a point in time at the end of the month under genius and under the state, under other state regulations as of the end of the month and maybe another random day, but it was always at a point in time. So the working group after publishing presentation and disclosure, and actually somewhat concurrent with that, was also working on a set of criteria to help issuers think about controls that underline the stablecoin operations and keep those things in balance and reportable if will over a period of time. So again, to your point, that update was published in December of 2025 and the reporting on that is not monthly, that's, it's more of an annual expectation, but issuers could certainly issue more frequently. And depending on how regulatory guidance does come into fruition over time there may be an expectation of more frequent reporting as well.
Dan Hood (14:11):
Excellent. All through this week, I think we've made it clear a couple of times, if not, we certainly mentioned it enough, but this year these are rules for issuers. This is about for the people who are issuing the stable coins, their reporting requirements to state federal authorities. Are there rules around, we know companies have, for instance, been buying other kinds of Europe companies that have been buying Bitcoin or other kinds of cryptocurrencies. Are there rules around reporting for those who buy stable coins, whether it's corporate purchasers or individuals, any kind of reporting there?
Jeff Trent (14:41):
Really this really does dictate the expectations of the stablecoin issuers themselves, who are the ones ultimately who must maintain that reserve to redeem the asset. So if you think about how this works in the marketplace, once it reaches, I'll call it the secondary market, it'll circulate, but that circulation doesn't in and of itself result in yet another reserve asset coming into the equation. So the reserves are always going to sit with the issuer, and that is the most important part because as they work their way through the marketplace, the ability to eventually redeem is what is paramount that needs to be covered.
Dan Hood (15:15):
And that always relies on the original issuers reserves. Okay, that makes sense. Let's take a little bit of a step back. We've been talking specifically about stable coins and I've sort of been glancing at other cryptocurrencies of crypto assets as we look around. But what are the sort of frameworks and regulations are we seeing for other kinds of digital assets and how are they in line with what's going, we're talking about with stable coins, are they crazy different? Does it vary from asset to asset? What does that universe look like?
Di Krupica (15:43):
Yeah, outside of stable coins, we are seeing a bunch of different activity. If you take in three different buckets, let's say on this accounting side, we've got FASB who has two separate projects focused on digital assets right now. One is looking at whether certain digital assets should qualify as cash equivalents or not and certain stable coins. And the other is focused on how to account for transfers of crypto assets. And things in that project are wrap tokens and rerecognition questions that weren't covered in the first round of fas BS guidance that was put out I think in December of 2023. So there's real movement towards clearer financial reporting in the space overall. And then you look at the IRS and the IRS is paying close attention to this. Obviously they've been expanding guidance around digital asset taxation and they're continuing to look how different types of digital asset transactions should be treated from a tax purpose or for tax purposes.
(16:51):
And we're seeing more structure emerge from the tax side. And the last thing I could think of has to do with the broader market structure or clarity legislation that's been proposed. And the goal of that bill is really to draw clear lines around which federal agencies are responsible for what type of digital assets. And once those designations are made, those agencies will issue their own regulation, which means we are going to see more detailed rules around trading, maybe custody disclosures, market oversight. When you put it all together, we're watching the ecosystem mature on these multiple fronts. Accounting, tax, regulatory stable coins are a piece of it, but the broader digital asset landscape is getting more defined year after year.
Dan Hood (17:43):
Yeah, it's fascinating. As you were talking about that, I was thinking, I can't recall, and I'm going to ask you both to correct me. If there is an area, have we seen an ecosystem like this in my memory of something comes up with it required this level of thinking about, well, what is it? How do we report it? How do we report it for tax purposes? How do we report it for accounting purposes? Has there been anything like this that's emerged recently or in say the last generation that had this sort of sweeping set of requirements of just thinking what it means and how you report 'em and how you think about them as an asset? Is there anything even equivalent? I'm throw that out for both of you to trophy. You think of Jeff, I you are your thoughts. I can't recall anything that that had this amount of attention from regulators and standard setters and just thinkers about what does an asset mean and what does it
Jeff Trent (18:34):
Yeah, and I think it's a fair point, Dan, and if I think about the construct of the ecosystem as you alluded to it, I think part of that comes from the fact that the ecosystem in its entirety comprises so many different types of things. I mean, if you think about what we have been talking about, we've been talking about stable coins, which is sort of this niche little part of the whole thing. There are other sort of utility tokens. There are, I think a couple of years back, people really were very talking about NFTs for example. Each of those things are different in nature and characterization. And so it's almost like you can't look at a group or throw the whole group on the table and go, oh look, it looks like this. You have to really pull each one apart and say, what is this thing?
(19:20):
And can I relate it to an existing asset type of class? And if so, how do I think about that? Does it not relate to another existing type of asset class? In which case, what do I need to uniquely think about in that regard? So I think you're right in that regard. It has so many variables to it that if you think about crypto assets in their entirety, you do sort of have to deconstruct it to a level where you can really hone in on, okay, what is the thing? How do we think about regulating it? How do we think about accounting for it? How do we think about using it for that matter? And then of course, putting controls into the ecosystem as well. So I think it's a very valid statement. It does feel pretty unique and difficult for that matter to really tackle.
Di Krupica (20:02):
I think the way that I look at it too is the fact that we have traditional finance and then we have digital assets. And a lot of people describe it as a new asset class. So you've got all these different functions and abilities, but it's a different asset class. And so there's just so many, I can't think of anything that's similar to that.
Dan Hood (20:30):
Yeah, well, because interesting is it's like we don't talk about all other assets as being physical assets, right? Physical versus digital isn't really the meaningful distinction. There's a million different kinds of physical assets, everything from pork bellies to gold to stocks, technically physical, but your ownership of a physical entity in a corporation and that kind of thing to describe all these assets under one umbrella as digital assets, yes, it's accurate in the sense of P, they're all digital, but beyond that, it doesn't really give you much useful information as you say. So you got to break it apart and say, what is the thing in itself and what does it do? And I think and am a hundred percent guilty of this thinking, well, they're all this digital assets, we should just treat them all sort of as digital assets, but you really can't. Or certainly from an accountant's perspective, not in a meaningful way or accountants or a sophisticated investors point of view. I should say again now, neither do, which I am. So that explains why I don't know what I'm talking about. It's a fascinating topic and there's a lot more, I'm sure we can dive a lot more deeply into it, but we're running out of time, so I want us to take a chance to say any final thoughts on how accountants specifically should be thinking about stable coins or as digital assets sold? Jeff, maybe I'll let you go first on this.
Jeff Trent (21:41):
Yeah, so I'll maybe say two things on the stablecoin front. I think that kudos to the AICPA for picking up this project and publishing what they did in the last year. I think that for both issuers and practitioners is a great way to think about stable coins and how they will impact the public accounting profession and the audit profession. I think that really is the types of things that are expected and needed in the marketplace and aligned to what we've seen coming out of the regulatory regimes, right? There's a great deal of alignment there, which is fantastic. More broadly, I will say to the point you just raised, Dan, we have now taken that work stream that accomplished those tasks and said, what else is there? And the answer is, there's more in the broader digital assets landscape that we need to contemplate. So we've actually, for instance, migrated into a broader digital asset controls work stream with the AICPA to think about what are the types of things that continue to challenge the professional or could potentially benefit from more guidance. So I think definitely more to come and for that matter, the ecosystem itself continues to evolve. Going back to your earlier physical asset where we now have a lot, and you'll continue to see more of digital asset representations of physical assets. So there's more and more you have to come.
Dan Hood (22:58):
Excellent. Well, we'll just set aside time every two to three months for you to come back and explain what's new on that front. How about you, as you look around, do you think accountants should be specifically bearing in mind either around stable coins or is digital assets in general?
Di Krupica (23:13):
I think the biggest takeaway here is that for accountants now is the time to really educate yourself. Stable coins aren't theoretical anymore. Entities are engaging with them, transacting with them in some cases, building them into their business models. So as entities begin issuing stable coins under the Genius Act, specifically as we talked about, the impact on CPAs and the financial services is going to be significant. And the good news is A-I-C-P-A has been for years for this, right alongside of the Genius Act summary, which I talked about. That's on our website, the development of the criteria. Jeff talked about with presentation and disclosures there, the controls of the stablecoin operations. And we have also, and this is all thanks to the digital Asset working group that I basically run and Jeff is a part of, we have a comprehensive digital asset practice aid that covers accounting and auditing as well.
(24:18):
And that evolves as we include additional content year after year as the landscape evolves, there's a tax publication on newly published tax practice aid that covers all of the tax side of the digital asset activity. So I think the key takeaway here is stable coins. Digital assets are becoming increasingly relevant and practitioners are going to encounter them more and more in their work. And the AICPA through work, the Digital Asset Working Group has built this strong set of resources. So I encourage everyone to access them, I encourage them to read them and stay informed as the area continues to evolve.
Dan Hood (25:03):
Excellent. Good to know. You all are on it on top of it and it sounds like there's a lot more for you to stay on top of. So we'll be keeping an eye out for more developments in this area. Very exciting stuff. Thanks to Di Krupica and Jeff Trend. Thank you both so much.
Jeff Trent (25:16):
Thanks for having us.
Di Krupica (25:17):
Thanks.
Dan Hood (25:19):
And thank you all for listen. This episode of On Air was produced by Accounting Today with audio production by Adnan Khan. Ready to review us on your favorite podcast platform and see the rest of our content on