Fed Note Highlights Double-Counting Risk in Stablecoin Money Measures

Federal Reserve staff research indicates that stablecoins could, in theory, be classified within established measures of money such as M1 or M2, according to CryptoSlate. However, the analysis also points to significant limitations in determining their effect on overall liquidity. If a stablecoin is backed by dollar reserves held in the banking system, the same underlying dollar could potentially be reflected both in the reserve account and through the stablecoin’s circulation. This creates a risk of double-counting when assessing money supply. Reserve overlap adds another complication, while stablecoins circulating offshore make it harder to establish where liquidity should be recorded. As a result, the research provides a framework for classification but does not deliver a clean measure of how stablecoins affect M1 or M2. The findings are relevant to the STABLE market asset and to broader efforts to assess stablecoins within traditional monetary aggregates.