The U.S. plans to introduce stablecoin regulation legislation, some stablecoins may face bans.

After the collapse of the Terra/UST algorithm stablecoin system, the United States has strengthened its regulation of stablecoins. Recently, there have been reports that the U.S. House of Representatives is brewing a stablecoin bill that intends to impose 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 type of stablecoin refers to those that can be converted, redeemed, or repurchased at a fixed monetary value and rely on another digital asset from the same creator to maintain a fixed price.

"Endogenous collateral stablecoin" generally refers to stablecoins issued using collateral created by the issuer (such as governance tokens). This mechanism can lead to a spiral increase in collateral prices and the number of stablecoins during a bull market, while it may trigger liquidations and a death spiral during a bear market. Regulators consider this mechanism to be high-risk.

The following are several types of stablecoins and the regulatory risks they may face:

1. Over-collateralized types (e.g., sUSD, aUSD): This type of stablecoin is over-collateralized by the project's own governance tokens as collateral for minting stablecoins. Although it has its own risk control mechanisms, it fits the description of "endogenous collateral stablecoins" and may face regulatory risks.

2. Mechanisms similar to Terra (such as USDN): The mechanism of Neutrino Protocol is similar to that of Terra, built on the Waves blockchain. Its stablecoin USDN's value needs NSBT issued by Neutrino to be maintained, which aligns with the criteria for the ban.

3. Some algorithmic stablecoins (such as Frax): Frax is a partially algorithmic stablecoin. Although the current collateralization ratio is high, it may still meet the definition of the legislative ban. This is particularly true when its algorithmic component has a higher weight, making it more likely to be regarded as a regulated entity.

4. Fiat-collateralized stablecoin: The bill draft provides a channel for the legal issuance of stablecoins backed by fiat currency. Banks or credit unions can issue their own stablecoins under the supervision of relevant regulatory agencies.

5. Other decentralized stablecoins: The legality of stablecoins such as MakerDAO's DAI and Liquity's LUSD, which are primarily collateralized by decentralized assets, is currently unclear under the new legislation.

Overall, the new stablecoin bill may affect many relatively secure decentralized stablecoin projects. For centralized stablecoins, the bill clarifies regulatory agencies, and bank-issued stablecoins may become more common. It is worth noting that the bill is currently still in draft form, and the final version may be adjusted, with formal implementation taking some time.