Yala’s Bitcoin-Backed YU Stablecoin May Fail to Regain Peg After Reported Attack

• YU stablecoin fell to $0.2046 after an exploit attempt

• Yala paused Convert and Bridge; Bitcoin reserves remain self-custodial or in vaults

• Attacker reportedly minted 120M YU, swapped 7.71M for ~7.7M USDC, converted to 1,501 ETH

YU stablecoin drops to $0.2046 after attempted attack; Yala confirms funds safe and pauses features while investigating — follow updates from COINOTAG.

Yala’s Bitcoin-collateralized YU stablecoin dropped as low as $0.2046 after an attempted protocol attack, failing to restore its $1 peg.

Yala’s Bitcoin-backed stablecoin YU has failed to regain its dollar peg following an “attempted attack” that sent the token down to $0.2046. COINOTAG reports the project has paused select features while security partners investigate.

What happened to Yala’s YU stablecoin?

YU stablecoin suffered an exploit attempt that destabilized its peg; the team reports no funds lost and has paused Convert and Bridge features while working with blockchain security firm SlowMist and other partners to investigate. Short-term peg restoration attempts remain ongoing.

How did the attacker reportedly exploit Yala?

Blockchain analytics firm Lookonchain reported the attacker minted 120 million YU on Polygon, then bridged and sold roughly 7.71 million YU for about 7.7 million USDC across Ethereum and Solana. The USDC was converted into approximately 1,501 ETH and distributed across multiple wallets. Per on-chain data, 22.29 million YU remain on Ethereum and Solana, with ~90 million YU still on Polygon unbridged.

Yala team announcing that all funds are safe. Source: Yala

Why did YU lose its peg and how big was the liquidity gap?

YU is backed by overcollateralized Bitcoin reserves intended to keep the token at $1. However, DEX Screener data shows the Ethereum pool has only about $340,000 in USDC liquidity compared with a reported $119 million market cap for YU. The mismatch between circulating supply after the mint and available stable liquidity likely amplified price slippage when large amounts were sold.

Is user capital safe and what product functions were affected?

Yala posted that “all funds are safe,” noting Bitcoin deposited to the protocol remains self-custodial or held in vaults with none lost. As a precaution, the team has disabled the Convert and Bridge features. Other protocol functions remain active but the team advised users to wait for a clear update before re-engaging.

Frequently Asked Questions

Did the attacker steal protocol reserves or user funds?

The Yala team states no funds were lost and that Bitcoin reserves remain self-custodial or in vaults. On-chain reports indicate the attacker minted YU and sold it, creating a market shock rather than an immediate drain of collateral reserves.

How much YU was reportedly minted and sold?

According to blockchain analytics reporting, the attacker minted 120 million YU on Polygon, sold roughly 7.71 million YU for around 7.7 million USDC, and converted that to ~1,501 ETH. Significant YU balances remain across chains.

What should YU holders do now?

Users should avoid using paused features (Convert and Bridge) until Yala issues a clear “green light.” Monitor official Yala updates and rely on on-chain explorers for transaction verification.

Stablecoin market context: How large is the market now?

The stablecoin market is approaching a $300 billion milestone, with varying totals reported by market trackers. This expansion follows a surge past $200 billion in late 2024 and is driven primarily by major issuers such as USDT and USDC, alongside yield-bearing entrants like USDe.

Key Takeaways

• Peg disruption: YU fell to $0.2046 after an exploit attempt and has not fully restored the $1 peg.
• Funds status: Yala reports no lost funds; Bitcoin collateral remains self-custodial or vaulted.
• User action: Avoid Convert and Bridge until Yala confirms feature safety and releases a formal update.

Conclusion

The Yala incident highlights liquidity and operational risks for Bitcoin-collateralized stablecoins. YU stablecoin faces ongoing peg pressure after a reported unauthorized mint and sell-off; COINOTAG will monitor official updates as security partners complete their investigation. Users should exercise caution and await confirmations before interacting with paused features.