- The Yala stablecoin lost its dollar peg after a protocol attack and crashed to $0.20 before recovering to $0.91.
- Attackers minted 120 million YU tokens on Polygon and sold 7.71 million for USDC, then converted the proceeds to ETH.
Yala stablecoin (YU) has lost its dollar peg following a protocol attack that took place at 5:14 UTC+8 today. The Polychain Capital-backed stablecoin crashed to $0.2074 before partially recovering to $0.917. The stablecoin currently trades at $0.8164 at the time of writing, down 14.57 % in the last 24 hours.
The incident has raised concerns about the security of the stablecoin with a market capitalization of $140 million. The value of YU holders depreciated by more than 22 percent when the fundamental purpose of the protocol to ensure a 1:1 dollar peg collapsed.
Our protocol recently experienced an attempted attack that briefly impacted YU’s peg. Thanks to the quick collaboration with @SlowMist_Team and our security partners, we’ve identified the issue and are already rolling out improvements to strengthen the system.
All user assets…
— Yala (@yalaorg) September 14, 2025
Security Response and Investigation Underway
Yala has contracted the services of external security experts to conduct investigations into the breach. The team is collaborating with SlowMist and Fuzzland to identify the extent of the attack and avoid the occurrence of similar attacks in the future.
The company also temporarily turned its Convert and Bridge off as it is implementing system upgrades. According to the team’s statement, all other protocol functions are active.
YU fluctuates between $0.798 and $0.996, though they assure users that their assets are safe. The stablecoin pool on Ethereum currently holds only $784,000 in USDC liquidity.
Blockchain analysis company Lookonchain disclosed the details of the attack. The alleged attacker minted 120 million YU on Polygon and sold 7.71 million on Ethereum and Solana platforms. This produced some 7.7 million USDC in proceeds.
The attacker then swapped the USDC into 1,501 ETH and transferred the assets to separate wallets. Records of these transactions are contained in the polygon blockchain, indicating that they took place within the attack window.
The hacker has 22.29 million YU tokens on the Ethereum and Solana networks. There are still 90 million YU tokens on the Polygon network, which means that the full effect of the attack has not been achieved yet.
Stablecoin Market Faces Persistent Challenges
The plight of YU is an illustration of persistent weaknesses in the stablecoin industry. The token holds a small market share compared to other players in the market, such as Tether (USDT) and Circle, which have market capitalizations of $170 billion and $73 billion, respectively.
More recent firms, such as Ethena (USDe) and WLFI (USD1), also have a valuation of $13.5 billion and $5.8 billion, respectively. These values highlight the fact that YU has a comparatively low market share and a low liquidity base.
Even the largest stablecoins experience depegging risks, as recent history has demonstrated. In 2023, the USDT of Tether was temporarily pegged to the dollar due to market instabilities caused by imbalances in the trading pools, which caused its devaluation. According to the Tether CTO Paolo Ardoino, volatile conditions provide an opportunity to exploit liquidity vulnerabilities.
In April, the synthetic stablecoin sUSD was dramatically depegged to $0.68. This incident happened due to protocol upgrades according to SIP-420, which misplaced mechanisms holding the dollar peg.
In October 2023, the same happened to TrueUSD, which halted minting operations with technology partner Prime Trust. This was viewed as a sign of insufficient fiat collateral support.
The collapse of TerraUSD (UST) and the Terra ecosystem that occurred in 2022 is still fresh in the market. Terra founder Do Kwon and the Luna Foundation Guard spent approximately 80,000 Bitcoin, valued at $ 9.2 billion, attempting to prop up the UST peg, but this effort ultimately failed.
