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YU stablecoin lost its peg after a $7.7M exploit on Sept 14, 2025. Learn how the attack worked, its market impact & what it means for DeFi.
Author: Tanishq Bodh
In mid-September 2025, the decentralized finance sector faced a significant shock when YU, a Bitcoin-backed stablecoin issued by Yala, suffered a major exploit. Within hours, its value plunged by almost 80%, sparking debates on security practices in cross-chain protocols. This article explains what YU is, how the attack unfolded, the effect on markets, and what it means for users and the wider DeFi landscape.
YU is a stablecoin launched by Yala in early 2024. Unlike dollar-pegged tokens such as USDT or USDC, YU is backed by Bitcoin held in self-custody or secure vaults.
Key points about YU:
The appeal lies in its hybrid model: crypto-native reserves and multi-chain usability, giving traders and developers a decentralized dollar substitute without banking intermediaries.
On Sunday, September 14, 2025, Yala’s protocol was targeted through its smart contract architecture.
The attacker exploited vulnerabilities in cross-chain bridging, similar to the “infinite mint” bug seen in Nomad Bridge (2022).
According to Lookonchain, large amounts of YU remain in those addresses, meaning the risk is ongoing.
Despite the breach, Yala reported that Bitcoin reserves stayed intact. The hack targeted YU’s minting logic and cross-chain transfers rather than the underlying collateral. This distinction matters because it suggests the core value backing YU was not drained, though confidence in the protocol took a major hit.
The attack caused severe price turbulence:
| Event | Price | Notes |
|---|---|---|
| Pre-exploit | $1.00 | Stable around peg |
| Immediate crash | $0.11 | 89% fall |
| Partial rebound | $0.917 | Arbitrage and recovery |
| Sep 15 close | ~$0.79 | Trading still below peg |
Additional data:
Exchanges including Bybit and OKX temporarily paused YU deposits and withdrawals, citing “network instability,” which limited arbitrage activity and slowed recovery.
Yala acknowledged the incident on X (formerly Twitter), calling it an “attempted attack” that impacted the peg. Their measures included:
No clear recovery plan or timeline has been shared. The team faces criticism for downplaying on-chain evidence of large-scale unauthorized minting.
For users and investors:
For the DeFi ecosystem:
Cross-chain interoperability remains a central theme in decentralized finance. However, each additional chain creates complexity, and poorly secured bridges have become frequent attack targets.
The YU exploit could motivate:
Investors may grow more cautious about emerging stablecoins, favoring projects with proven track records or transparent incident response plans.
