Yala’s Bitcoin-backed stablecoin YU has struggled to regain its dollar peg after an “attempted attack” early Sunday, causing the token to drop to $0.2046.
The Yala team acknowledged the incident in a post on X, indicating that it “briefly impacted YU’s peg.” They also mentioned collaborating with blockchain security firm SlowMist and other security partners to investigate the breach.
“Update: All funds are secure. Bitcoin deposited to Yala remains self-custodial or in vaults, with no losses incurred,” the team stated in their latest update on X. “We’ve identified issues and, as a precaution, temporarily paused some product features. Please await our confirmation before re-engaging,” they added.
To avert further instability, Yala has disabled its Convert and Bridge features. “All other protocol functions remain unaffected, and user assets are protected,” the team mentioned in a subsequent post.
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Attacker reportedly mints 120 million YU
The Yala team did not confirm whether the hack was successful, resulting in any losses. However, blockchain analytics firm Lookonchain reported that 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 spread the funds across multiple wallets, according to Lookonchain. The attacker still retains 22.29 million YU on Ethereum and Solana, with an additional 90 million YU remaining on Polygon, unbridged.
YU, supported by overcollateralized Bitcoin (BTC) reserves, is designed to maintain a $1 peg. While the project boasts a market cap of $119 million, it only has $340,000 in USDC liquidity within its Ethereum pool, according to DEX Screener.
After dropping to as low as $0.2046, YU bounced back to $0.917. However, the stablecoin has faced continued pressure and has not restored its peg, currently trading around $0.7869 on DEX Screener.
Cointelegraph attempted to contact Yala for further comment but did not receive a response by publication time.
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Stablecoin market nears $300 billion
The stablecoin market is approaching a $300 billion milestone. Last Thursday, CoinMarketCap indicated a market cap of $300 billion, while CoinGecko and DefiLlama reported $291 billion and $289 billion, respectively.
After surpassing a $200 billion market cap in late 2024, the growth of the stablecoin market has accelerated, although mainstream adoption still eludes them, according to Axelar’s head of growth, Chris Robins.
“$300 billion marks an early milestone in the growth of stablecoins,” he stated, noting that this growth has primarily been driven by Tether USDt (USDT), Circle’s USDC, and Ethena Labs’ yield-bearing stablecoin USDe (USDE).
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