The United States plans to introduce a stablecoin bill that imposes a ban on algorithmic stablecoins.

After the collapse of the Terra/UST Algorithmic 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, intending 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 activities. These types of 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 Stablecoin" usually refers to a stablecoin 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 during a bear market, it may trigger a death spiral due to liquidation. The failure of Terra/UST is a typical example.

Based on the current information, various types of stablecoins may be affected by this bill:

1. Over-collateralized stablecoins: For example, certain projects use their governance tokens as collateral to mint stablecoins that are over-collateralized. Although there are risk control mechanisms in place, they still fit the description of "endogenous collateral stablecoins."

2. Stablecoins with mechanisms similar to Terra: such as the Neutrino Protocol built on a certain blockchain, which has a mechanism similar to Terra and may face regulatory risks.

3. Some Algorithmic Stablecoins: Even if the current collateralization rate is high, some Algorithmic Stablecoins may still fall under the definition of the legislative ban.

It is worth noting that the draft bill simultaneously 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 regulators. The bill also guides the Federal Reserve in establishing processes to review applications from non-bank issuers. Issuing stablecoins without approval may face severe penalties.

For other types of decentralized stablecoins, such as stablecoins collateralized by decentralized assets, there is currently no clear definition in the bill, and their legality still needs to be clarified further.

Overall, this bill aims to regulate the stablecoin market and could potentially impact many existing decentralized stablecoin projects. However, the bill is currently still in draft form and may be discussed as early as next week, with potential changes before it officially comes into effect. Market participants should closely monitor the latest developments of the bill to adjust their strategies in a timely manner.