The U.S. plans to introduce a stablecoin bill, various types of stablecoins may be affected

With the collapse of the Terra/UST algorithm stablecoin system, the United States' regulatory attitude towards stablecoins is becoming increasingly strict. Recently, there have been reports that the U.S. House of Representatives is brewing a bill aimed at stablecoins, which includes a ban on algorithmic stablecoins similar to TerraUSD (UST).

According to the draft of the bill, the creation or issuance of new "endogenous collateral stablecoins" will be considered illegal. This definition covers stablecoins that can be converted, redeemed, or repurchased at a fixed currency value and rely on other digital assets from the same issuer to maintain a fixed price.

"Endogenous collateral stablecoin" usually refers to a mechanism for issuing stablecoins using assets created by the issuer (such as governance tokens) as collateral. This model may lead to a spiral increase in collateral prices and the number of stablecoins during a bull market, while it may trigger a death spiral due to liquidation in a bear market. The failure of Terra/UST is a typical case of this mechanism risk.

The regulatory risks faced by various types of stablecoins are as follows:

1. Over-collateralized: For example, Synthetix's sUSD has its own risk control mechanism, but it still meets the definition of "endogenous collateral stablecoin" and may face regulation.

2. Terra-like mechanisms: USDN of Neutrino Protocol has a mechanism similar to Terra and may be subject to regulatory impact. In contrast, USDD has temporarily avoided this issue due to its sufficient and diverse collateral.

3. Some algorithmic stablecoins: such as Frax, although the current collateralization rate is relatively high, its mechanism includes an algorithmic component, which may still fall under the scope of the legislation.

4. Fiat-backed: The new legislation provides a legal channel for banks and credit unions to issue fiat-backed stablecoins, but they must be subject to the supervision of relevant regulatory authorities.

5. Other decentralized stablecoins: Such as MakerDAO's DAI and Liquity's LUSD, which are mainly ETH-collateralized stablecoins, it is currently unclear their legality under the new legislation.

For decentralized stablecoins, the new legislation may impact many relatively secure projects. As for centralized stablecoins, the legislation clarifies the regulatory bodies, and the trend of banks issuing stablecoins may increase.

It is worth noting that the bill is currently still in draft stage and may be discussed as early as next week, with its contents still subject to change. There is still some time before it officially takes effect, and industry participants should closely monitor subsequent developments.