Stablecoin Integration Hinges on Accurate Accounting
The Federal Reserve published a research note on September 4 that explores how stablecoins could be integrated into the M1 and M2 money supply measures.
The M1 measure includes currency and highly liquid balances, while M2 adds less liquid savings-type assets. The authors of the note applied this functional split to payment stablecoins, suggesting that if they're used as a store of value or for crypto trading, non-M1 M2 might be the better fit.
If stablecoins become a common medium of exchange, their immediate transferability could support an M1 classification. However, the framework remains conditional and requires standardized circulation data and a reporting chain suitable for monetary-statistics compilation.
The note also highlights the problem of reserve overlap, where 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.