The U.S. plans to introduce a stablecoin bill, some stablecoins may face risks.

After the collapse of the Terra/UST algorithmic stablecoin system, the United States has clearly tightened its regulatory stance on stablecoins. Recently, it was reported that the U.S. House of Representatives is brewing a bill targeting stablecoins, which will implement a ban on algorithmic stablecoins similar to TerraUSD (UST).

According to the draft bill, the issuance or creation of new "endogenous collateral stablecoins" will be considered illegal. This definition encompasses stablecoins that can be converted, redeemed, or repurchased at a fixed monetary value, and that rely on another digital asset from the same creator to maintain a fixed price.

"Endogenous collateral stablecoin" usually refers to stablecoins issued using collateral created by the issuer (such as governance tokens). This mechanism can lead to a spiral increase in the price of collateral and the quantity of stablecoins during a bull market, while it may trigger liquidations and a death spiral during a bear market. The failure of Terra/UST is a typical case, which is why legislators are cautious about such mechanisms.

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

1. Over-collateralized: For example, Synthetix's sUSD, which uses the governance token SNX as collateral, has a 400% collateralization rate for minting stablecoins. Despite having risk control mechanisms, it still fits the description of an "endogenous collateral stablecoin."

2. Terra-like mechanism: The USDN of the Neutrino Protocol has a mechanism similar to Terra and may face regulatory risks. In contrast, USDD has temporarily avoided this issue due to sufficient and diverse collateral.

3. Some algorithmic stablecoins: For example, Frax, although the current collateral ratio reaches 92.5%, still relies on the governance token FXS, which may be considered as subjects prohibited by the legislation.

4. Fiat-backed: The new legislation provides banks and credit unions with a legitimate channel to issue stablecoins backed by fiat currency, but they must comply with the supervision of relevant regulatory agencies.

5. Other decentralized stablecoins: such as MakerDAO's DAI, Liquity's LUSD, etc., mainly collateralized by decentralized assets like ETH. The legality under the new legislation is currently unclear.

In general, the new bill draft will prohibit the issuance of new endogenous collateral stablecoins, which may affect many relatively safe stablecoin projects. For centralized stablecoins, the bill clarifies the regulatory agencies, and the trend of banks issuing their own stablecoins may be reinforced.

It should be noted that the bill is currently still in the draft stage and may be discussed as early as next week, with possible adjustments to its content. It will take some time from the draft to official implementation, and we will continue to monitor its development.