A Federal Reserve staff note published Sept. 4 says regulated payment stablecoins could eventually enter M1 or M2, the official US money-supply measures, but only after adjustments that separate genuinely new dollar liquidity from reserves the system already counts. The paper is independent staff research, not Fed policy, and stablecoins remain excluded from the aggregates today.
Same dollar, counted twice
The Fed staff framework splits the question by function. M1 covers currency and highly liquid transaction balances; M2 adds M1 plus savings-type assets such as small time deposits and retail money market funds. If stablecoins act mainly as a store of value or trading liquidity, they fit non-M1 M2; if they become a common medium of exchange for payments, M1 fits better.
But function is only half the problem. Under the GENIUS Act, permitted issuers must hold at least 1:1 identifiable reserves in assets that can include bank deposits, Treasury instruments, and government money funds — assets some of which are already captured inside M1 or M2. If an issuer places dollars in a counted bank deposit or money fund and then issues stablecoins against that reserve, counting the tokens at face value could add a new line to the aggregate while part of the backing sits in another counted component already. The Fed note calls this the same-dollar problem and says the overlap must be assessed before any adjustment is made.
USDC illustrates the scale of the accounting task. Circle's transparency page says most of its reserve sits in the Circle Reserve Fund, an SEC-registered government money market fund, plus Treasury securities and bank cash outside that fund. Circle's July 31 assurance reported 71.826 billion USDC in circulation and reserve assets worth $71.904 billion, figures that establish backing at a point in time but don't by themselves yield a net addition to the money stock.
Geography and transaction data leave gaps
A dollar stablecoin issued by a US-regulated company can circulate globally on a public blockchain, and transaction records generally lack enough geographic detail to isolate the US-held portion. The Fed note says GENIUS applies to US-regulated issuers without distinguishing domestic from international circulation, so additional reporting may be needed before any US-specific figure is possible.
Raw blockchain transfer counts also overstate payment activity, because a single smart-contract transaction can emit several transfer events. A Bank for International Settlements working paper published in June analyzed more than 593 million event logs from 141 million Ethereum transactions in 2025 involving USDT, USDC, and PayPal USD. Roughly one third of the transactions generated multiple steps, and nearly 60% of transfer events occurred inside complex transactions that combined trading, lending, arbitrage, and settlement — meaning treating every event as a standalone payment can exaggerate both activity counts and the apparent payment role of stablecoins.
The scale makes the distinctions consequential. CryptoSlate's Sept. 4 snapshot put the global stablecoin category at $292.1 billion across 73 assets, while FRED reported seasonally adjusted US M2 at $23.218 trillion for July 2026. The Fed staff framework leaves the actual net-addition adjustment unresolved: it lays out three separate jobs — classifying function, consolidating already-counted reserves, and isolating US circulation — before any classification change could take place.
Source: Federal Reserve
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