Fed stablecoin research exposes how the same dollar could count twice in M1 or M2

A Federal Reserve staff note published Sept. 4 sketches a route for regulated payment stablecoins to enter M1 or the broader M2 money supply. Its accounting framework requires adjustments before gross circulation could enter either measure.

Payment stablecoins are excluded from the US monetary aggregates today. The new note makes future treatment depend on economic use, alongside adjustments for reserve assets already counted elsewhere and the separation of US circulation from global activity. Otherwise, a larger money-supply figure could partly reflect a new wrapper around dollars the system already measured.

The distinction matters for anyone using M1 or M2 to judge dollar liquidity. A statistical increase driven by reclassification says little about newly created purchasing power.

The note is independent staff research, reflects only its authors' views, and is not part of a Federal Reserve policy deliberation. Existing definitions remain unchanged, and the analysis presents conditional possibilities.

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