A Federal Reserve staff note has set out how regulated payment stablecoins could eventually be included in the US money supply measures M1 or M2, while warning that simply adding the tokens at face value could count the same dollar twice.
The research, published on 4 September, says stablecoins are currently excluded from official US monetary aggregates. Any future inclusion would depend on how they are used, the assets backing them and whether those reserves are already recorded elsewhere in M1 or M2.
Without those adjustments, a rise in the money supply could partly reflect dollars being placed inside a new digital wrapper rather than the creation of additional purchasing power.
The distinction is important for analysts using M1 and M2 to assess dollar liquidity. A statistical increase caused by reclassification would not necessarily indicate that more spendable money had entered the economy.
The note is independent research by Federal Reserve staff and reflects only the views of its authors. It does not represent a Federal Reserve policy decision, and the existing definitions of M1 and M2 remain unchanged.
M1 is the narrowest official measure of US money. It includes currency and highly liquid balances available for everyday transactions by households and businesses. M2 includes M1 as well as less liquid, savings-style assets such as small-denomination time deposits and retail money market funds.
The Federal Reserve authors apply that functional distinction to payment stablecoins. If the tokens are mainly held as a stable store of value or used to provide liquidity for crypto trading, they may be more appropriately treated as an asset within M2 but outside M1.
However, if stablecoins become widely used for household and business payments, their ability to be transferred immediately could support their inclusion in M1.
Any decision would remain conditional. The GENIUS Act requires permitted issuers to maintain identifiable reserves worth at least 1:1 against the tokens they issue and to publish reserve information each month. It does not itself decide whether stablecoins belong in M1 or M2.
That assignment would be a separate statistical decision. The Federal Reserve says standardised circulation data and a reporting system suitable for compiling monetary statistics would also be needed.
The ‘same-dollar’ problem
The main accounting difficulty concerns the assets held as reserves. Under the GENIUS Act, permitted reserves may include bank deposits, Treasury instruments and government money market funds.
Some bank deposits and money-fund net assets are already included in M1 or M2. If an issuer receives dollars, places some of them in a bank deposit or money market fund, and then issues stablecoins against those reserves, counting the tokens at face value could add another entry to the money supply while the backing remains represented elsewhere.
That is the potential double-counting problem.
The overlap would apply only to reserve assets already included in M1 or M2. Its scale would depend on the composition of each issuer’s backing and on how each reserve asset is treated statistically. The Federal Reserve note says that information would have to be assessed before an adjustment could be selected.
USDC illustrates why its headline supply figure does not answer the full reserve question. Circle says most of its reserves are held in the Circle Reserve Fund, an SEC-registered government money market fund that can hold cash, short-dated US Treasuries and overnight US Treasury repurchase agreements.
Circle’s July assurance also lists Treasury securities held outside the fund, together with cash deposited at regulated financial institutions.
The latest active monthly assurance listed on Circle’s transparency page covered 31 July. It reported 71.826 billion USDC in circulation and reserve assets with a fair value of $71.904 billion.
Those figures show the level of backing at a particular point in time. They do not establish the amount that could be added net to M1 or M2. That would require a separate consolidation calculation.
A reliable estimate would need to compare the reported reserve categories with the precise components already captured in the monetary aggregates, remove only genuine overlaps and retain backing assets that are outside M1 and M2. Current sources do not quantify that potential net addition.
US and global circulation
Geography creates another challenge. A dollar stablecoin issued by a US-regulated company can circulate internationally on a public blockchain, while transaction records generally do not contain enough geographical information to identify which portion should be counted in a US monetary measure.
The Federal Reserve note says the GENIUS Act applies to US-regulated issuers without distinguishing between domestic and international circulation. Additional reporting may therefore be needed to separate US activity from global use.
An issuer’s total number of outstanding tokens will not necessarily correspond to money held or used by US residents.
The economic purpose of the tokens would also require separate evidence. The Federal Reserve’s proposed functional test asks whether stablecoins behave more like transaction money or savings. Simple blockchain transfer counts would not be enough, because one smart-contract transaction can generate several transfer events.
A Bank for International Settlements working paper published in June examined more than 593 million event logs from 141 million Ethereum transactions carried out in 2025 involving USDT, USDC and PayPal USD.
About one-third of those transactions produced multiple steps or event logs, while almost 60% of transfer events took place within complex transactions.
Such bundles can involve trading, lending, arbitrage, liquidity provision and settlement. Treating every emitted event as an independent payment could therefore overstate both the level of activity and the role stablecoins play in payments.
The 60% figure describes the structure of the events, rather than proving how the stablecoins were being used economically. A functional classification under the Federal Reserve’s framework would require separate evidence.
Scale of the market
The size of the stablecoin market makes the accounting distinctions significant. A CryptoSlate market snapshot published on 4 September put the global stablecoin category at $292.1 billion across 73 assets.
Its USDC market page listed approximately $74.5 billion in market capitalisation and 74.51 billion tokens in supply.
Those global figures do not show how much is owned or used by US residents. They were also recorded on different dates and for different purposes from Circle’s 31 July assurance, so the figures should not be treated as interchangeable.
For context, FRED reported seasonally adjusted US M2 at $23.218 trillion for July 2026 in an update dated 25 August. That figure demonstrates the scale of the established monetary aggregate, but does not resolve what net adjustment would be required for stablecoins.
The Federal Reserve’s staff framework therefore identifies three separate tasks before any change in classification could be made: establishing how stablecoins function, consolidating reserve assets already included in M1 or M2, and isolating the part of circulation relevant to the United States.
Transaction-level research can help with the first task. Reserve data and information about residency remain necessary for the other two.
Stablecoins could eventually make M1 or M2 a more complete measure of money. But failing to make the necessary adjustments could blur balances that are already counted with genuinely new dollar liquidity.
Liam Wright, also known as “Akiba”, is a reporter, podcast producer and Editor-in-Chief at CryptoSlate. He believes decentralised technology has the potential to make…
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