Fed staff note maps path for stablecoins into M1, M2 with double-counting caveat

September 5, 2026 at 09:45 PM1 min

This digest was compiled by AI from multiple sources — links to the originals are below.

A Federal Reserve staff note published Sept. 4 outlines how regulated payment stablecoins could enter M1 or M2 money supply measures. The framework requires adjustments to avoid counting the same dollar twice when stablecoin reserves are already captured elsewhere. The note is independent research and does not change existing definitions.

Key Facts

The Federal Reserve staff note was published on Sept. 4.
Payment stablecoins are currently excluded from US monetary aggregates M1 and M2.
The GENIUS Act requires permitted stablecoin issuers to maintain at least 1:1 identifiable reserves and publish monthly reserve information.
The note says some bank deposits and money-fund net assets used as stablecoin reserves are already captured in M1 or M2.
The note is independent staff research and is not part of Federal Reserve policy deliberation.

Stablecoin Classification Framework

The Fed authors apply the functional split between M1 and M2 to payment stablecoins. If stablecoins are used predominantly as a stable store of value or for crypto trading liquidity, non-M1 M2 may be the better fit. If they become a common medium of exchange for household and business payments, their immediate transferability could support an M1 classification. The framework remains conditional and does not change existing definitions.

Double-Counting Risk

The central stock-measurement problem sits on the reserve side. Under the GENIUS Act, permitted reserves can include bank deposits, Treasury instruments, and government money funds. If an issuer receives dollars, places part of them in a bank deposit or money fund, and issues stablecoins against that reserve, counting the tokens at face value could add a new line to the aggregate while part of the backing remains in another counted component. Only reserve assets already represented in M1 or M2 create overlap, and the extent must be assessed before any adjustment is chosen.