Fed Releases Framework to Measure Stablecoin Money Supply

The Federal Reserve has released an analytical framework for classifying stablecoins as money. This move signals that the central bank is preparing to measure assets that Wall Street is already building.

The framework categorizes stablecoins based on their primary function: if used as everyday medium of exchange, they would align with M1; if held primarily as a store of value or for crypto trading, they would fall into non-M1 M2. This distinction mirrors the Fed's historical approach to liquidity, such as the 2020 reclassification of savings deposits.

The central analytical hurdle identified by the staff is the risk of double-counting. Because stablecoins are typically backed by bank deposits, U.S. Treasury bills, or government money market funds, the underlying assets are already captured within existing M1 and M2 data. Simply adding the face value of stablecoins to the current $19.9 trillion M1 or $23.2 trillion M2 would inflate the money supply figures.

The framework intersects with the GENIUS Act, specifically the Section 4(a)(11) prohibition on direct interest payments. If stablecoins cannot pay interest, they function less like savings vehicles and more like demand deposits. This behavioral shift makes them more likely candidates for M1 classification.