CMC News

YU Stablecoin Crashes 80% Following Protocol Attack

Bitcoin-backed stablecoin $YU plummeted to $0.2046 after suffering a protocol attack early Sunday morning. The Yala-issued token has struggled to regain its $1 peg despite team assurances that all funds remain secure.

#Blockchain analytics firm Lookonchain reported that attackers minted 120 million YU tokens on Polygon before bridging and selling portions for USDC. The malicious actor converted approximately 7.71 million YU tokens into 7.7 million USDC across multiple networks.

#Yala has temporarily disabled its Convert and Bridge features as a precautionary measure. The team confirmed they are collaborating with security firms including SlowMist to investigate the breach and implement additional safeguards.

"All other protocol functions remain unaffected, and user assets remain safe," Yala stated in their latest update. However, the stablecoin continues trading below its intended peg at approximately $0.7869.

The attacker still holds 22.29 million YU tokens across #Ethereum and #Solana, with an additional 90 million tokens remaining unbridged on Polygon. These holdings represent significant selling pressure that could further challenge price stability.

YU operates as an overcollateralized stablecoin backed by $BTC reserves exceeding the token's value. Despite boasting a $119 million market cap, the project maintains only $340,000 in USDC liquidity within its Ethereum pool.

The incident highlights ongoing challenges facing stablecoin projects in maintaining their pegs during adverse market conditions. Industry experts note that even established stablecoins like #Tether's USDT have experienced temporary peg losses during volatile periods.

This attack underscores the importance of robust security measures and adequate liquidity pools for stablecoin projects. The crypto community continues monitoring YU's recovery efforts as the team works to restore market confidence.