Fed Research Paves Way for Stablecoin Integration into US Money Supply Measures

The Federal Reserve has published research on how stablecoins could be integrated into the M1 and M2 money supply measures. The report, released September 4, proposes a framework for regulated payment stablecoins to enter these aggregates based on their economic use.

The current definitions of M1 and M2 exclude payment stablecoins from being counted as part of the US monetary aggregates. However, if they are used predominantly as a medium of exchange for household and business payments, they could be classified as transaction money in M1. If they behave more like savings-type assets, they may fit into non-M1 M2.

The research also highlights the issue of reserve overlap, where stablecoins issued by companies with reserves already represented in M1 or M2 could add a new line to the aggregate while part of the backing remains in another counted component. The authors emphasize that reliable evidence on predominant economic use and issuer-level reserve composition is needed before any adjustments are made.

The report uses USDC as an example, citing Circle's July assurance which reported $71.904 billion in reserve assets with a fair value against 74.51 billion tokens in supply. However, the authors note that this data gap prevents a defensible net estimate of the addition to M1 or M2.

The research also touches on the issue of geographic overlap, where global stablecoin circulation can complicate monetary-statistics compilation. The authors suggest that additional reporting may be needed to isolate US circulation from global activity.