Yala’s Bitcoin-Backed Stablecoin YU Faces Crisis After $7.7M Exploit

• $7.7M stolen in USDC during significant security breach.
• YU stablecoin struggles to recover after losing its dollar peg.

On September 14, 2025, Cointelegraph and Cryptopolitan reported that Yala, the issuer of the Bitcoin-backed stablecoin YU, suffered a major security breach. The vulnerability in Yala’s cross-chain infrastructure was exploited by an attacker, leading to the unauthorized minting of 120 million YU tokens. This exploit disrupted the stablecoin’s one-to-one peg with the U.S. dollar, causing its price to plummet to $0.2046 before partially recovering.

Although YU briefly rebounded to $0.91, its value has since been erratic, struggling to regain its dollar peg. The instability has created extreme liquidity challenges, adding to market skepticism around the stablecoin project.

On-chain analysis from Lookonchain traced the attacker’s movements, revealing that the counterfeit tokens were minted on the Polygon network. The attacker bridged 7.71 million YU tokens to Ethereum and Solana, converting them into $7.7 million worth of USDC. These funds were further exchanged for 1,501 ETH and dispersed across various wallet addresses.

The liquidity imbalance in YU’s pools intensified the fallout. Data from DEX Screener showed that its Ethereum-based liquidity pool held just $340,000 in USDC following the breach, exacerbating price volatility. Prices have remained highly unstable, with YU trading at roughly $0.7869 on Ethereum. Compounding this issue, the attacker still holds 90 million tokens on Polygon plus 22.29 million tokens across Ethereum and Solana. This surplus supply threatens further price declines, complicating recovery efforts.

In response, Yala halted its Convert and Bridge features to contain the damage. Blockchain security firm SlowMist was engaged for investigative and remedial action. Yala emphasized that Bitcoin deposits and user funds remain unaffected, though the exploit has exposed deep vulnerabilities in its protocol.

The breach has raised major concerns about both protocol security and governance within Yala’s ecosystem. This high-profile incident calls into question the robustness of emerging stablecoin projects in an already competitive sector. Security lapses of this scale jeopardize the trust investors place in such initiatives and underscore the criticality of strong safeguards.

As of 20:00 UTC on September 14, 2025, YU (YU) is priced at $0.7869, reflecting instability following the breach. According to CoinMarketCap, the token’s 24-hour trading volume has fallen by 34.5%, highlighting ongoing liquidity shortfalls and waning investor confidence. The stablecoin’s failure to reestablish its U.S. dollar peg underlines the significant challenges ahead.