How Re7 Labs is Managing the xUSD De-pegging Impact Across Ecosystem Assets Worth $13M

The recent xUSD de-pegging incident has sent ripples through the Euler Finance ecosystem, with Re7 Labs responding proactively to minimize contagion risks. Over $13 million in ecosystem funds face potential exposure, prompting the platform to take swift protective measures. This crisis highlights the vulnerabilities that can emerge when stablecoins lose their peg and how interconnected DeFi protocols remain despite safeguards.

Stream’s Partial Debt Settlement and Recovery Efforts

Stream’s situation represents one of the more stabilizing elements of the de-pegging fallout. The company’s CEO reassured stakeholders that Stream’s core financial position remains solid and insulated from broader market volatility. To demonstrate commitment and reduce systemic risk, Stream has already begun repaying portions of its lending obligations on Plasma and transferred approximately $7 million worth of USDC from Re7 Labs’ Worldchain vault back to the protocol. Meanwhile, Re7 Labs has implemented preventive measures by liquidating all Earn vault positions tied to xUSD, setting the xUSD market cap to zero, and removing the asset from Euler Earn’s supply mechanisms entirely.

Elixir and Multi-Protocol Risk Mitigation Strategies

The situation with Elixir-deUSD and sdeUSD tokens reveals the interconnected risks across derivative stablecoins. When Re7 Labs discovered that certain borrowers using deUSD and sdeUSD as collateral maintained ties to Stream, the decision was made to systematically reduce exposure. This included implementing stricter borrowing caps and reallocating funds away from markets containing xUSD, deUSD, and sdeUSD. The aggressive de-risking approach proved effective on Plume, where all sdeUSD-backed borrowing positions have been fully repaid, removing a layer of systemic risk.

Stable Labs’ Unresolved $13.1M Exposure

The most concerning element remains Stable Labs’ USDx and SUSDx positions. Re7 Labs has engaged directly with Stable Labs CEO Flex, requesting immediate liquidity injections to allow affected users to exit their positions safely. However, the affected funds totaling approximately $13,114,000 remain at risk, with Stable Labs having provided no formal response to these requests. This standoff has prompted Re7 Labs to escalate its approach, consulting with legal advisors to develop comprehensive legal strategies and strategic responses once a full assessment of the incident concludes.

The broader lesson from this de-pegging cascade is that robust protocols need multiple layers of risk management—not just technical safeguards but also operational agility and institutional accountability.