Yala’s BTC-Backed Stablecoin YU Crashes 80% later than Exploit Attempt
YU, a BTC-collateralized stablecoin issued by Yala, has failed to fully recover its $1 peg later than an attempted exploit on Sunday sent its value plunging to as low as $0.2046.
Yala confirmed the incident in a series of posts on X, saying it “briefly impacted YU’s peg” and that it was working with blockchain security firm sluggishMist to investigate. The company stressed that no BTC reserves were lost, noting that funds remain “self-custodial or in vaults,” but it suspended its Convert and Bridge features as a precaution.
Yala, which launched YU in ahead 2024 as a decentralized alternative to dollar-pegged stablecoins, had marketed the token as a securer option because of its direct BTC backing. The project raised and received ahead liquidity support from Polygon Ventures.
Analytics firm Lookonchain reported that the attacker minted roughly 120 million YU on Polygon, then bridged and sold 7.71 million YU for $7.7 million USDC across ETH and Solana. The proceeds were later converted into 1,501 ether and spread across multiple wallets. The attacker still holds tens of millions of YU across networks, Lookonchain added.
Blockchain researchers noted similarities to previous “infinite mint” exploits on such as Nomad in 2022, which lost $190 million, suggesting vulnerabilities in Yala’s smart contract architecture rather than its BTC reserves.
YU briefly bounced back to $0.917 before sliding again. By late Monday, it was trading around $0.79, according to DEX Screener, well short of its intended $1 peg. Yala did not immediately respond to a request for comment.
temporarily disabled deposits and withdrawals of YU, citing “network instability,” further limiting arbitrage opportunities that could have assisted restore the peg.
Stablecoin Market Nears $300 Billion
The incident comes as the global stablecoin market edges closer to a $300 billion market cap, according to data from CoinMarketCap, CoinGecko, and DefiLlama. Growth has been driven mainly by Tether’s USDT, Circle’s USDC, and Ethena Labs’ USDe, though industry players acknowledge mainstream adoption remains limited.
YU, backed by overcollateralized BTC reserves, has a reported market cap of about $119 million but relatively shallow liquidity — only $340,000 USDC in its ETH pool — a swings during the exploit.
By comparison, USDC’s largest Curve pool holds over $150 million in liquidity, underscoring how smaller projects remain vulnerable to manipulation. Analysts at Kaiko noted that YU’s trading volume spiked 500% during the exploit window, suggesting opportunistic arbitrageurs contributed to volatility.
Regulators are also taking note: the European Union’s MiCA framework, set to take effect in 2025, will require stablecoin issuers to maintain full reserves and meet strict licensing conditions, while the U.S. Congress is still debating a federal stablecoin bill. Japan’s FSA recently approved yen-backed stablecoins, highlighting how global jurisdictions are moving at diverse speeds in regulating the space.
