The AICPA and its affiliate, the Center for Audit Quality (CAQ), recommended that the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC) specify that monthly examinations of stablecoin reserve composition reports be conducted in accordance with AICPA standards when implementing provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the GENIUS Act.
The law establishes a regulatory framework for payment stablecoins, a type of cryptocurrency designed to maintain a stable value, typically by being pegged to the U.S. dollar.
Among other provisions, the GENIUS Act requires monthly examinations of reserve-related reports for permitted payment stablecoin issuers, as well as annual financial statement audits for certain non-public issuers with more than $50 billion in outstanding stablecoin issuance.
The law’s provisions take effect on the earlier of January 18, 2027, or 120 days after federal banking agencies issue final regulations.
Monthly examinations and reporting criteria
In particular, the AICPA and the CAQ in comment letters said that banking agencies should specify Statements on Standards for Attestation Engagements (SSAEs), including AT-C Section 205, Assertion-Based Examination Engagements, for monthly examinations, as these standards “further promote consistency and quality” of engagements.
The AICPA attestation standards provide for services with limited assurance and reasonable assurance: the former offers a moderate level of confidence, while the latter offers a high level of confidence in the information examined.
An examination under reasonable assurance provides the same level of assurance as a financial statement audit.
“We find this to be an appropriate level of assurance for this proposed requirement,” wrote the CAQ, which represents audit firms.
The two organizations also requested clarity regarding the specific elements of the agencies’ reserve requirements that must be included in the monthly examination.
The CAQ said the agencies’ proposed rules appear to limit monthly examinations to information contained in the required composition report, while other reserve asset requirements may not be directly addressed by the report. It asked both regulators to clarify whether those additional requirements are intended to be within the examination’s scope.
The AICPA recommended that the agencies use its stablecoin reporting criteria as a foundation for the examinations, with applicable regulatory requirements added to management’s assertion. The organization said its reporting criteria provide a comprehensive and appropriate framework to meet the GENIUS Act’s reporting requirements, and these criteria are already in use and will continue to serve as the basis for issuer reporting and CPA examinations.
The AICPA and the CAQ also requested clarification regarding the independence standards applicable to accounting firms conducting monthly examinations. They said that if AICPA attestation standards apply, AICPA independence standards would generally follow, unless the agencies intend to require a different set of independence rules.
Annual audits for larger issuers
As for annual audits for larger issuers, the CAQ said the OCC’s requirement to use PCAOB standards by PCAOB-registered firms would likely be unworkable because audits of private stablecoin issuers are not under the PCAOB’s purview.
GENIUS Act states that the financial statement audit requirement is for payment stablecoin issuers with more than $50 billion that are not subject to the reporting requirements under Section 13(a) or Section 15(d) of the Securities and Exchange Act of 1934.
Instead, the CAQ pointed out that accounting firms performing such audits are subject to the AICPA’s oversight, including the Peer Review Program and internal inspection programs.
“We encourage the OCC to consider these existing auditor oversight mechanisms to promote audit quality and accountability,” the CAQ said.
The AICPA noted another drawback: limiting the work to PCAOB-registered firms could restrict the availability of CPAs, reduce competition, and create bottlenecks, particularly for smaller or state-qualified issuers.
In its FDIC comment letter, the CAQ supported the agency’s proposed flexibility allowing financial statement audits of nonpublic entities to be conducted under either PCAOB auditing standards or GAAS, which are based on AICPA Statements on Auditing Standards.
Internal control examinations
The AICPA and CAQ suggested the possibility of an annual independent examination of internal controls over stablecoin operations and reserves as the proposals explore mechanisms to increase transparency and reliability of information regarding payment stablecoin issuers’ reserves.
The CAQ said such an examination should address management’s assertions about the design and operating effectiveness of the internal-control structure and procedures over stablecoin operations and reserves. It said the requirement could build on internal-control and information system provisions already included in the OCC and FDIC proposals.
The CAQ cited the Digital Asset Market Clarity Act, New York Department of Financial Services guidance on U.S. dollar-backed stablecoins, and Rule 17a-5 of the Exchange Act as examples of regulatory frameworks that include examinations of internal controls.
Reserve disclosure and timing
The letters addressed agency questions about whether issuers should disclose the names of depository institutions and other financial institutions holding reserve assets.
The CAQ said it supports transparency regarding institutions holding reserve assets but cautioned that naming specific institutions in monthly reports could have unintended consequences. It said that if an issuer moves assets from one depository institution to another for operational reasons, users of a report could interpret the change as indicating concerns about the stability or solvency of the institution.
As an alternative, the CAQ recommended disclosure of information such as the geographic location and type of institution, referring to the AICPA’s stablecoin reporting criteria.
Both organizations said real-time reserve information can present assurance challenges because procedures performed under AICPA attestation standards are often retrospective. They said that if agencies require real-time information, it should be clearly labeled as not subject to examination.
The CAQ opposed requiring issuers to publish monthly composition reports before the related examination is completed. It said preliminary reports could cause confusion or undermine confidence if the examination later identifies material differences. If issuers publish preliminary reports, the CAQ said they should be labeled as unexamined, and any material differences between preliminary and final reports should be disclosed and published.
The organizations also referenced random day reserve reporting and surprise examinations as possible approaches to increase transparency. The CAQ said regulators could use one or more measures, including examinations of reserves as of a randomly selected day during the month, annual surprise examinations, and annual examinations of internal controls.
Accounting treatment
On accounting matters, both organizations referred to the FASB’s work on the classification of certain digital assets as cash equivalents.
The CAQ said that if accounting questions arise, the OCC should raise them with FASB. The AICPA said the OCC should clarify uses of the term “fair value of reserve assets,” noting that generally accepted accounting principles may require some assets to be presented using other measurement bases, such as par value or net asset value.
The AICPA said its stablecoin presentation and disclosure criteria avoid treating “fair value” as a universal term and instead call for disclosure of the valuation basis applicable to each reserve asset class.
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