USD1 Stablecoin Faces Coordinated Attack, WLFI Token Takes Hit

The USD1 stablecoin, designed to maintain a stable value of $1, was briefly knocked off its target in a coordinated attack on Monday. According to CoinGecko data, the token slipped to $0.994 at its lowest point, around 0.6% under its intended peg, before recovering to trade in the $0.998 to $0.999 range later in the day.

World Liberty Financial (WLFI), the company behind USD1, claimed that attackers compromised several co-founder accounts as part of the operation. The project alleged that hackers used social engineering tactics and third-party promotion to amplify damage. Additionally, short sellers reportedly opened large positions against the WLFI token, betting on a sharper price decline.

The incident has raised concerns about market manipulation and transparency in the crypto space. World Liberty's ability to contain the impact of the attack through its stablecoin mint and redeem mechanism was seen as a positive aspect. However, the company's ties with Binance, which currently custodies around 87% of all USD1 in circulation, have come under scrutiny.

The incident has also drawn attention to the potential conflict of interest between President Trump's pardon of Binance CEO Changpeng Zhao and WLFI's links to the exchange. While no formal enforcement actions have been announced, regulators and policymakers will likely assess the stablecoin's long-term credibility in light of this episode.