Researchers Kristen Payne and Mary-Frances Styczynski released an analytical framework evaluating digital assets within official US monetary supply measures. The study examines payment stablecoins, tokenized bank deposits, and tokenized money market funds to determine their placement inside M1 or M2 aggregates. While the paper reflects personal author views rather than official board policy, it establishes a foundational blueprint for modern central bank accounting.
Federal Reserve methodology categorizes assets strictly by primary economic utility. Assets acting directly as a medium of exchange belong inside M1 due to their immediate transaction settlement capabilities. Assets operating as a short-term store of value belong within non-M1 M2 metrics alongside traditional savings instruments.
Evaluating Stablecoin Integration Across Aggregates
Payment stablecoins pose unique classification dynamics based on practical consumer usage. If everyday households and businesses adopt stablecoins primarily for commercial transactions, these tokens function as a direct medium of exchange. This behavioral pattern justifies placing transactional stablecoins inside M1 liquidity tracking.
Conversely, stablecoins utilized predominantly for trading collateral, yield farming, or temporary value storage act as short-term capital holds. In that operational context, the Fed framework assigns them to M2 money supply measures.
Accounting for Tokenized Deposits and Money Market Funds
Tokenized bank checking deposits already fit within existing M1 reporting. Because these tokenized checking instruments remain direct liabilities of regulated commercial banks, depository institutions already include them within routine data submissions to central banking authorities. Similarly, tokenized time deposits qualify for M2 coverage as short-term savings vehicles.
Tokenized retail money market funds are similarly accounted for in current non-M1 M2 metrics. Tokenized shares in retail funds function identically to traditional MMF shares, taking one to two business days for cash redemption while providing short-term yield.
Primary Structural Obstacles to Official Measurement
Reserve double-counting represents a critical structural challenge before incorporating stablecoins into official data releases. Issuers back stablecoin supplies using underlying bank deposits, short-term Treasuries, and cash reserves. Simply adding circulating token values directly into money supply aggregates would artificially inflate calculations, requiring precise reserve deduction adjustments.
Global borderless circulation creates an additional statistical hurdle. Public blockchain addresses move tokens globally without verifiable geographic identity tags. As M1 and M2 specifically track domestic US monetary holdings, separating foreign token holdings from domestic balances requires new reporting infrastructure alongside evolving regulatory frameworks.
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