Quick gut-check: If a token moves $35 trillion in a year but policymakers still can’t decide what box to stick it in, does it even qualify as “money” anymore?
Here's What Actually Happened
Late Tuesday in Davos, IMF Deputy Managing Director Bo Li stepped on the main stage and—without much fanfare—dropped a question that’s now ricocheting through every Telegram channel I’m in:
“Are stablecoins part of M0, M1, or a brand-new bucket of liquidity altogether?”
That one line ripped open an old scab. Remember, on-chain data shows stablecoins processed roughly $35 trillion in transactional volume over the past 12 months, while average circulating supply hovered near $194.6 billion. In other words, they settled more value than American Express and Discover combined, but we’re still debating definitions. 🤯
Why Bo Li’s Word Choice Feels Like A Big Deal
I’ve noticed regulators love fancy monetary acronyms—M0, M1, M2. They’re just buckets that decide how banks set reserves. If stablecoins shift from the “shadow assets” column into an official money supply line item, commercial banks suddenly need to hold capital against them. That could kneecap the 6,000-plus lending pools humming on DeFi right now.
Our Discord mod @kev-on-chain summed it up perfectly at 2 a.m.:
“If Circle’s USDC lands in M1, the Fed can basically treat it like checking deposits. That’s regulatory judo.”
Meanwhile, The Numbers Keep Growing
Data trackers at Artemis and Glassnode put current aggregate supply closer to $250 billion. Yes, that’s about a 28% jump from the rolling 195 billion figure Li referenced on stage. And most of that capital is just squatting in Bitcoin side lines—Skew’s dashboard shows roughly 15% of BTC spot volume is paired directly with USDT this month.
I can’t help but think of 2019’s alt-season echoes here. Back then, stablecoin inflows front-ran a 380% jump in Chainlink. Different era, same energy?
The Policy Patchwork Is Getting Messier
Time for a lightning-round recap because there’s a lot going on:
- 🇺🇸 GENIUS Act (US) cleared House committee in April. Limits reserve assets to T-Bills or cash, plus a surprise 1:1 audit rule every 30 days.
- 🇪🇺 MiCA sequel draft leaked in Brussels (yes, already). It caps algorithmic stables at €500 million in outstanding supply. Terra ghosts, anyone?
- 🇭🇰 Stablecoin Ordinance scheduled for August 2025. Sources at OSL tell me wallets will need dual licensing—one for custody, one for issuance. Double red tape.
That’s three different continents, three different playbooks. Bo Li basically said the quiet part out loud: this fragmentation invites loopholes. I think we all remember FTX Bahamas edition and how fast money moves to the friendliest jurisdiction.
Voices From The Trenches
I asked around in our weekly Twitter Space (shout-out to the 412 folks who tuned in despite the NBA finals):
@quant_mom: “If we can’t get unified rules, I’ll just arb New York versus Hong Kong spreads. Regulators are creating my next revenue stream.”
@hodl-lawyer: “The IMF wants Basel-style capital buffers. Fine. But show me the systemic risk data first. Right now it’s mostly speculative fear.”
@sats4snacks: “Honestly I’m more worried about USDT waving a magic wand and blacklisting my address than any IMF memo.”
Three users, three agendas. That’s crypto in a nutshell.
So, Are Stablecoins Really Money?
I can’t give you a tidy answer, and maybe that’s the point. In my experience, the market tends to front-run regulation. People treat a thing as money once it clears at par. USDT does that. USDC usually does—except those 37 minutes during last year’s SVB depeg scare (I swear my heart still skips a beat thinking about the 0.88 print on Coinbase).
But money is also about settlement finality. Cash settles instantly in hand; bank wires settle legally in days. On-chain stablecoins? They can be frozen by a 2-of-3 multisig held in Delaware. That’s … not quite base money.
Cultural Side Note—Taylor Swift Test
Stay with me. I use the T-Swift merch table test: if you can’t buy a hoodie at a stadium with it, normies won’t call it money. Last week in Miami, concession stands accepted Apple Pay, Bitcoin via Strike, but not USDC. So yeah, stablecoins have a brand problem.
What To Watch Over The Next Six Months
1. Stress Tests: Circle is reportedly running simulated runs on USDC reserves every quarter. If those disclosures go public, expect copycat transparency from Tether or a PR nightmare.
2. IMF + FSB Guidance: Li said an “interim framework” is due by Q4 2025. If that doc pegs stablecoins to M1, banks will lobby hard for carve-outs. Watch Senate hearings for clues.
3. Hong Kong’s Go-Live: August 2025 launch could trigger a regulatory arbitrage wave. I’ve already seen OTC desks lining up entity filings in Kowloon.
4. Fed Chair Drama: Trump floated firing Powell (again). If the Fed chairmanship flips, stablecoin bank partnerships—Silvergate 2.0, anyone?—could either blossom or wither.
Why This Matters For Your Portfolio
Here’s the part that directly hits our bags. If stablecoins get squeezed into tighter capital rules, issuers might pass costs to us via redemption fees or slower mint windows. That reduces on-chain liquidity and makes BTC’s next leg up feel heavier. Remember May 19, 2021? Liquidity evaporated and Bitcoin free-fell 30% in an afternoon. Stablecoins were the shock absorbers.
On the flip side, clearer rules could entice pension funds—yes, the so-called smart money—to finally park idle cash in tokenized dollars. That’s a tide-lifting-all-boats scenario.
My Bottom Line
I’m skeptical that a global consensus magically appears, but I’m also not packing my Ledger in a doomsday bunker. We’ve survived Tether-doomsday threads since 2017 and a Luna self-immolation. Bo Li’s comment is a reminder that grown-ups are paying attention now. In crypto-time, that’s progress.
If you hold more than two months of living expenses in stablecoins, maybe diversify across issuers—or even slip some into old-fashioned fiat for now. And keep one eye on Davos soundbites; apparently a single question can spark a week-long Twitter feud.
Stay safe, stay liquid, and as always: see you in the mempool.
