The post Stablecoins Under Threat: Analyzing Security Risks in the Crypto Ecosystem appeared on BitcoinEthereumNews.com.

Terrill Dicki
Jun 18, 2025 05:07

Stablecoins, vital to the crypto market, face security risks from centralized and decentralized vulnerabilities. Learn how these risks impact platforms and users, according to Chainalysis.

Stablecoins, integral to the cryptocurrency landscape, are increasingly under scrutiny due to their security vulnerabilities. As digital assets pegged to fiat currencies, stablecoins facilitate decentralized finance (DeFi) protocols, enable payments, and provide on-chain liquidity. However, their rising prominence has made them attractive targets for cybercriminals, according to Chainalysis. Centralized vs. Decentralized: Unique Risks Centralized stablecoins like USDC and USDT are backed by reserves held by issuers, ensuring transparency but exposing them to custodial and regulatory risks. Users must trust issuers to maintain reserves and operate with integrity, while regulatory actions can impact token supply. In contrast, decentralized stablecoins such as DAI and crvUSD, which rely on crypto collateral or algorithms, face smart contract vulnerabilities. These vulnerabilities can be exploited by attackers to manipulate token issuance or drain collateral pools, posing significant threats to the ecosystem. Common Security Threats Stablecoins face diverse threats, reflecting their central role in crypto infrastructure. Smart contract exploits, custodial breaches, phishing, and rug pulls are some of the common attack vectors. Attackers exploit vulnerabilities in DeFi protocols, compromise issuer infrastructure, and employ social engineering tactics to steal private keys or authorize malicious transactions. Incidents Highlighting Vulnerabilities Incidents like the collapse of TerraUSD (UST) in 2022 and the Euler Finance hack in 2023 exemplify the vulnerabilities in stablecoins. These events caused significant financial losses and highlighted the risks of experimental tokenomics and insufficient collateralization mechanisms. The collapse of UST, for instance, wiped out over $60 billion in value, triggering market-wide contagion. Similarly, the Euler Finance hack resulted in approximately $197 million in losses, with stablecoins being drained from…

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Filed under: News - @ June 19, 2025 10:25 am