Fed Staff Keep Payment Stablecoins Like USDC Out of M2, Citing 3 Data Gaps

Stablecoins Stay Outside M2

Payment stablecoins used across crypto exchange venues remain excluded from the Federal Reserve's M1 and M2 monetary aggregates, while tokenized deposits and tokenized money market funds are already counted, according to a staff research note published on the Fed's own site on September 4. The FEDS Notes paper, titled “New Forms of Money and the U.S. Monetary Aggregates,” was authored by Board economists Kristen Payne and Mary-Frances Styczynski, who frame it strictly as personal analysis — not a policy deliberation or a signal of any forthcoming accounting change.

The authors apply a two-layer test to decide where blockchain-based assets belong. The first layer is functional: assets that serve primarily as an immediately payable medium of exchange with little or no yield sit closest to M1, the narrowest and most liquid measure of the money supply, while assets used mainly as short-term stores of value carrying a market rate of return fit better in M2, which adds less-liquid savings-type instruments to M1. The second layer is practical: whether usable reporting data and infrastructure exist, whether the asset would double-count figures already in the aggregates, and whether the asset circulates inside the United States or globally. On that basis, tokenized deposits — bank deposits recorded and transferred on-chain — are already folded into the aggregates because banks report them mixed with traditional deposits, and institutional clients increasingly use them like checking accounts for settlement and treasury operations. Tokenized money market funds likewise sit inside M2 under the retail money market fund line, though the authors flag that if decentralized finance pushes these funds into payment use, their M1-style characteristics could force a reclassification. Circle's USDC is cited as the closest example of a payment stablecoin, which could map to M1 or M2 depending on how holders actually use it.

GENIUS Act Reporting as the Future Data Base

Three practical obstacles keep payment stablecoins outside the aggregates for now. First, data: the Fed lacks reliable, timely circulation figures, since no standardized reporting pipeline feeds stablecoin supply data into its statistical systems. Second, double counting: stablecoin reserves are held in Treasury bills, bank deposits and Federal Reserve balances, much of which is already counted in the aggregates, so simply adding stablecoin circulation would tally the same dollars twice. Third, geography: stablecoins move globally across public proof-of-stake networks and other chains, including via every bridge protocol route, while monetary statistics cover only the United States — and on-chain holdings cannot be cleanly split between domestic and foreign holders. The authors point to the GENIUS Act, enacted in July 2025, as the future data foundation: it requires issuers to back coins one-to-one, report reserve holdings monthly and refrain from paying holders interest directly, though the note observes that indirect compensation may still exist and that whether GENIUS-compliant stablecoins deliver equivalent user benefits remains unclear. The paper recommends the Fed keep monitoring, prepare to update data-collection systems, revise aggregate definitions as the digital asset environment matures and coordinate with other federal regulators on standardized reporting. It sets no timeline for inclusion and offers no sizing estimates. Readers tracking the market in real time can follow live spot and futures prices on Bybit.

COINOTAG's read: the note signals rising institutional attention to stablecoin plumbing rather than any near-term shift in official statistics. Our aggregate market data shows the Fear and Greed Index at 63/100 (Greed), Bitcoin holding a 67.8% share of COINOTAG-tracked market cap of roughly $2.29 trillion.