Fed staff note warns stablecoins could double-count dollars in M1/M2
What happened
On September 4, 2026 the Federal Reserve staff released a research note that examines how regulated payment stablecoins could be counted in the U.S. money supply measures M1 and M2. The note explains that, without adjustments, the same dollar could be counted twice—once as a reserve asset and again as a stablecoin.
Key points
- Stablecoins are currently excluded from official U.S. monetary aggregates.
- The note proposes a framework that would classify stablecoins as either transaction money (M1) or savings‑type money (M2) based on how they are used.
- Reserve assets that back stablecoins may already be counted in M1 or M2, creating a potential “double‑count” issue.
- Geographic separation of U.S. versus global circulation and detailed transaction analysis are needed for accurate measurement.
Fed staff note details
The research is an independent staff analysis and does not represent official Fed policy. It outlines four tests that would determine whether a stablecoin should be included in M1 or M2: (1) its economic function, (2) overlap of reserve assets, (3) geographic location of circulation, and (4) the nature of transaction activity.
Under the GENIUS Act, issuers must keep at least a 1:1 identifiable reserve and publish monthly reserve data. The note says that some reserve components—such as bank deposits and money‑market fund assets—are already part of M1 or M2, so counting the stablecoin on top of them would inflate the money supply.
Confirmed facts
- Stablecoins are not part of the current M1 or M2 calculations.
- The Fed staff note was published on September 4, 2026.
- The note is a staff view, not a policy decision.
Uncertainties
- How much of the reserve backing will becoin and how it should be adjusted is not yet quantified.
- Methods for separating U.S. from global stablecoin circulation are not defined.
- The exact impact on M1 and M2 totals remains uncalculated.
Why it matters
M1 and M2 are widely used to gauge dollar liquidity and economic health. If stablecoins are added without correcting for reserve overlap, the reported money supply could appear larger than the actual purchasing power, potentially misleading analysts and policymakers.
Next steps
The GENIUS Act requires issuers to report detailed reserve information each month. The Federal Reserve would need to develop statistical rules to assess the four tests and to adjust the aggregates accordingly before any stablecoin balances are officially included.
