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YU stablecoin depeg sent Yala’s token to $0.20 after an attempted attack, with liquidity gaps keeping it below its $1 peg.
Author: Akshat Thakur
Published On: Sun, 14 Sep 2025 15:37:53 GMT
September 14, 2025 – YU stablecoin depeg shook markets as Yala’s Bitcoin-backed stablecoin dropped as low as $0.2046 after an “attempted attack” early Sunday, failing to restore its $1 peg.
Blockchain analytics firm Lookonchain reported that the attacker minted 120 million YU on Polygon, bridging and selling 7.71 million YU for 7.7 million USDC across Ethereum and Solana. The move drained liquidity pools and triggered the YU stablecoin depeg.
Although YU is backed by overcollateralized Bitcoin reserves, its Ethereum liquidity pool contained only $340,000 USDC, leaving it vulnerable. After the incident, YU traded around $0.7869, still under pressure from lost market confidence.
Yala confirmed the attempted attack in an X post, assuring users that Bitcoin collateral remains safe and under self-custody. The team disabled Convert and Bridge features while working with security firm SlowMist.
“We’ve identified issues and paused product features as a precaution,” Yala said. “Please wait for our green light before re-engaging.” The protocol admitted that additional audits and stricter procedures will be required to prevent another YU stablecoin depeg event.
YU is designed as a Bitcoin-collateralized stablecoin with overcollateralization safeguards. But despite a $119M market cap, its Ethereum pool had only $340K USDC liquidity at the time of the exploit, making recovery difficult.
Thin liquidity combined with the minting exploit amplified price slippage, leaving YU unable to stabilize near its peg.
The incident comes as the stablecoin market nears a $300B milestone, led by Tether (USDT), Circle (USDC), and Ethena’s USDe. But Yala’s YU highlights the fragility of smaller, experimental stablecoins when liquidity is shallow and security issues arise.
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