The U.S. money supply includes safe, stable assets that households and businesses can use to make payments or hold as short-term savings.
The Federal Reserve tracks the money supply through three main measures: the monetary base, M1 and M2. M1 covers the most liquid forms of money, such as cash and bank deposits that can be used immediately. M2 includes M1 plus less liquid savings assets, including small time deposits and retail money market funds.
These measures are widely used to assess the health of the U.S. economy. But as financial markets evolve, the Fed has periodically updated how it defines and measures money.
A new Fed research note looks at whether newer assets — including tokenized bank deposits, tokenized money market funds and payment stablecoins — should be reflected in the monetary aggregates. The authors say these assets have some of the same features as traditional forms of money and outline a framework for deciding how they could be measured.
The approach looks at two main questions: how an asset is used and how it can be measured reliably.
Assets that are mainly used for payments, are highly liquid and can be spent immediately would generally fit the role of M1. Assets that are more commonly used for short-term savings and need to be redeemed before spending would be closer to M2.
The Fed also highlights four practical issues: whether reliable data is available, whether there is a consistent system for reporting it, whether the asset could be counted twice, and whether it is used inside or outside the U.S.
The research is independent and does not represent a Federal Reserve policy decision. Still, it highlights how the growth of stablecoins and tokenized financial assets could eventually change how economists measure the amount of money in the U.S. economy.
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