The U.S. plans to introduce a stablecoin bill, various types of stablecoins may face regulatory risks

After the collapse of the Terra/UST algorithmic stablecoin system, the United States' regulatory attitude towards stablecoins has become increasingly strict. Recently, there have been reports that the U.S. House of Representatives is brewing a new stablecoin bill, which includes provisions to impose a ban on algorithmic stablecoins similar to TerraUSD (UST).

According to the draft bill, issuing or creating 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 creator to maintain a fixed price.

"Endogenous Collateral Stablecoin" usually refers to the mechanism of issuing stablecoins using collateral created by the issuer (such as governance tokens). This model can lead to a spiral increase in collateral prices and stablecoin issuance during bull markets, while in bear markets it may trigger liquidations and death spirals, with the failure of Terra/UST being a typical case.

The following are several types of stablecoins that may be affected:

1. Over-collateralized: For example, Synthetix's sUSD, although it has its own risk control mechanism, still fits the description of "endogenous collateral stablecoin" and may face regulatory risks.

2. Terra-like mechanism: For example, the USDN of the Neutrino Protocol has a mechanism similar to that of Terra, and its price has been long below 1 dollar, likely facing regulation. In contrast, USDD has temporarily avoided this issue due to sufficient and diversified collateral.

3. Some algorithmic stablecoins: such as Frax, although currently with a high collateral ratio, its mechanism includes an algorithmic component, which may comply with the definition of the legislative ban.

4. Fiat-collateralized: The legislation provides a channel for stablecoins backed by legally issued fiat currency, but it must be approved by the relevant regulatory authorities.

5. Other decentralized stablecoins: Such as MakerDAO's DAI and Liquity's LUSD, which are mainly backed by decentralized assets like ETH, the legality under the new legislation is currently unclear.

For decentralized stablecoins, the new endogenous collateral stablecoins may be deemed illegal, which could affect some relatively safe stablecoin projects. As for centralized stablecoins, the bill clarifies the regulatory agencies, and banks may be more involved in the issuance of stablecoins.

It is important to note that the bill is currently still in draft stage and may be discussed in the near future, with content subject to change, and it will take some time before it officially comes into effect. With the clarification of regulations, the stablecoin market landscape may undergo significant changes, and both investors and project parties need to closely monitor the relevant developments.