The United States is about to release a stablecoin bill, and some stablecoins may face challenges.

After the collapse of the Terra/UST algorithm stablecoin system, the United States has strengthened its regulation of stablecoins. Recently, it was reported that the stablecoin bill proposed by the U.S. House of Representatives will ban algorithm stablecoins similar to TerraUSD (UST).

The draft bill stipulates that the issuance or creation of new "endogenous collateral stablecoins" is illegal. Such stablecoins can typically be converted, redeemed, or repurchased at a fixed monetary value and rely on another digital asset from the same creator to maintain their fixed price.

Endogenous collateral stablecoins typically use collateral created by the issuer (such as governance tokens) to issue stablecoins. This mechanism can lead to a spiral increase in collateral prices and stablecoin quantities during a bull market, while in a bear market, it may trigger a death spiral due to liquidation. For regulators, this mechanism poses significant risks.

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

1. Over-collateralized: Stablecoins like sUSD, aUSD, etc., which use their governance tokens as collateral, may face regulatory risks.

2. Mechanism similar to Terra: The USDN of the Neutrino Protocol has a mechanism similar to Terra, which may comply with the description of the ban.

3. Some algorithmic stablecoins: For example, Frax, although the current collateralization rate is relatively high, its algorithmic part may still be subject to regulatory influence.

For fiat-collateralized stablecoins, the legislation provides a legal issuance channel for banks and credit unions, supervised by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The bill also directs the Federal Reserve to establish processes to review applications from non-bank issuers. Issuing stablecoins without approval may face up to five years in prison and a $1 million fine.

Other decentralized stablecoins, such as MakerDAO's DAI and Liquity's LUSD, primarily use decentralized assets like ETH as collateral. It is currently unclear whether they are considered legal under the recognition of the U.S. House of Representatives.

Overall, the bill could impact various endogenous collateral stablecoins, including some relatively safe stablecoins. For centralized stablecoins, regulators have made it clear that banks issuing their own stablecoins may become more common.

It is worth noting that the bill is currently still in draft form and may be discussed as early as next week, with potential adjustments to its content. It will take some time before it actually comes into effect. As the regulatory environment changes, the stablecoin market may experience a new landscape.