Yala Stablecoin Attack Sends YU Off-Dollar Peg
The overcollateralized Bitcoin YU stablecoin of Yala is facing its biggest stress test. On Sunday, the coin fell to $0.2046 after the team called it an “attempted attack.”
On social media platform X, Yala confirmed the incident and assured users that individuals’ Bitcoin deposits are secured in self-custody and vault products. The project has blocked its Convert and Bridge features to contain the fallout, however.
The team said: “Please wait for us to give you the green light before you engage with it again but everything else works.”
Hacker Allegedly Mints 120 Million YU
According to the blockchain analytics firm Lookonchain, the attacker exploited Yala’s protocol on Polygon by minting 120 million YU tokens.
According to reports, 7.71 million YU were quickly exchanged for 7.7 million USDC on the Ethereum and Solana blockchains.
They converted the stolen USDC to ETH and spread the funds across multiple wallets. Large holdings remain.
- YU worth $22.29 million US dollars
- 90M YU unbridged on Polygon
The exploit highlights YU’s liquidity weakness. With a market cap of $119 million, the Ethereum pool had only $340,000 in USDC liquidity, making it very susceptible to price shocks.
Also Read : HSBC and ICBC in Race for Hong Kong’s New Stablecoin Licences under Tougher Rules
YU Struggles to Recover Peg
After falling dramatically to $0.20, YU rose back to as high as $0.917. However, momentum fizzled out and the token has remained stuck at $0.78, far from the ideal $1 stablecoin status.
Yala has dealt a serious blow to YU, which claimed to be a secure Bitcoin-backed stablecoin that resists volatility.
Stablecoin Market Nears $300 Billion
As the global market for stablecoins gears up for the $300B range, a major crisis emerges. Tether (USDT), Circle’s USDC, and Ethena Labs’ USDe drive growth as new entrants like Yala highlight both innovation and fragility in the fast-growing sector.
Chris Robins of Axelar said:
“$300 billion is just an early milestone, stablecoins are still nowhere near mainstream, despite explosive growth.”
In Conclusion: Bitcoin-Backed Stablecoins Go Under Stress Test
The YU depegging presents serious liquidity, security, and stability issues for Bitcoin-collateralized stablecoins. As Yala tries to regain supporters’ trust, it reminds us that while stablecoins are a backbone for DeFi, even the newest models are not without risk.
