Yala’s Bitcoin-backed stablecoin YU has failed to regain its dollar peg following an “attempted attack” early Sunday that sent the token plummeting to $0.2046.
The Yala team confirmed the incident in a post on X, noting that it “briefly impacted YU’s peg.” The team added that they are working with blockchain security firm SlowMist and other security partners to investigate the breach.
“Update: All funds are safe. Bitcoin deposited to Yala remains self-custodial or in vaults, with none lost,” the team wrote in their latest post on X. “We’ve identified issues and, as a precaution, paused some product features. Please wait for our green light before re-engaging,” they added.
To prevent further instability, Yala has disabled its Convert and Bridge features. “All other protocol functions remain unaffected, and user assets remain safe,” the team said in a follow-up post.
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Attacker reportedly mints 120 million YU
The Yala team did not disclose whether the hack was successful and resulted in any losses. However, blockchain analytics firm Lookonchain claimed the attacker exploited the Yala protocol by minting 120 million YU tokens on Polygon (MATIC), then bridging and selling 7.71 million YU for 7.7 million USDC (USDC) across Ethereum (ETH) and Solana (SOL).
The attacker has since converted the USDC into 1,501 ETH and dispersed the funds across multiple wallets, per Lookonchain. The attacker still holds 22.29 million YU on Ethereum and Solana, with an additional 90 million YU remaining on Polygon, unbridged.
YU, backed by overcollateralized Bitcoin (BTC) reserves, is designed to maintain a $1 peg. While the project boasts a market cap of $119 million, it has only $340,000 in USDC liquidity in its Ethereum pool, according to DEX Screener.
After dropping to as low as $0.2046, YU resurged to $0.917. However, the stablecoin has since been under pressure, failing to restore its peg. YU is currently trading around $0.7869 on DEX Screener.
Cointelegraph reached out to Yala for comment, but had not received a response by publication.
Related: Alabama state senator warns GENIUS Act could harm small banks
Stablecoin market nears $300 billion
The stablecoin market is approaching a $300 billion milestone. On Thursday, CoinMarketCap reported $300 billion, while CoinGecko and DefiLlama listed $291 billion and $289 billion, respectively.
After surpassing a $200 billion market cap in late 2024, the stablecoin market growth has accelerated, but stablecoins are yet to gain mainstream adoption, according to Axelar’s head of growth, Chris Robins.
“$300 billion is an early milestone in the growth of stablecoins,” he said, noting that the stablecoin growth has been mainly contributed by Tether USDt (USDT), Circle’s USDC, as well as Ethena Labs’ yield-bearing stablecoin USDe (USDE).
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Source: https://cointelegraph.com/news/yala-yu-stablecoin-depegs-after-attack?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
