Polychain-Backed Yala Stablecoin YU Crashes to $0.20 After Protocol Attack

The Yala stablecoin (YU), a Bitcoin-native over-collateralized stablecoin backed by Polychain, lost its dollar peg around 5:14 UTC+8 today following a protocol attack that sent YU crashing to $0.2074 before recovering to $0.917. The Yala team promptly addressed the incident on X (formerly Twitter), confirming the attack and its impact on the YU stablecoin’s price stability. “ Our protocol recently experienced an attempted attack that briefly impacted YU’s peg, ” the team ￰1￱ protocol recently experienced an attempted attack that briefly impacted YU’s ￰2￱ 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 ￰3￱ user assets… — Yala (@yalaorg) September 14, 2025 “Assets Remain Safe”- Yala Stablecoin Team Scrambles to Restore Trust Yala Co-founder Vicky Fu disclosed that the team is now working with external security specialists, including SlowMist and Fuzzland, to investigate the ￰4￱ team assured users that all assets remain secure while they focus on restoring stability and strengthening protocol ￰5￱ the announcement, YU, designed to maintain a stable $1 value, fluctuated between $0.798 and $0.996.) September 14, 2025 A stablecoin’s core function is maintaining a 1:1 “peg” to fiat currency value; without this peg, the fundamental purpose ￰6￱ operates as an over-collateralized stablecoin, meaning it’s backed by digital asset reserves (BTC) that exceed the stablecoin’s own ￰7￱ YU still struggling to maintain its peg, Yala faces a critical period for securing user trust and industry ￰8￱ roughly $140M market cap, YU remains small compared to established stablecoins like Tether (USDT) and Circle (USDC), which hold $170 billion and $73 billion market capitalizations, ￰9￱ newer stablecoins like Ethena (USDe) and WLFI (USD1) command $13.5 billion and $5.8 billion valuations, respectively.

However, YU’s peg struggles aren’t the first of their kind in the crypto ￰10￱ Tether’s USDT temporarily lost its dollar peg in 2023 when two major trading pools became heavily ￰11￱ CTO Paolo Ardoino explained that volatile stablecoin markets create opportunities for attackers to exploit liquidity pool ￰12￱ recently, in April, synthetic stablecoin sUSD, long pegged to the ￰13￱ within the Synthetix ecosystem, dramatically lost its peg , dropping to $0.68. Unlike YU, sUSD didn’t face an attack. Instead, its depeg resulted from the protocol’s transition to new debt and collateralization mechanisms under SIP-420 , designed to improve capital efficiency. @synthetix_io ’s sUSD stablecoin crashes to $0.68, exposing algorithmic peg vulnerabilities and sparking DeFi stability concerns amid protocol changes. #Stablecoin #DeFi ￰0￱ — ￰14￱ (@cryptonews) April 18, 2025 Rather than enhancing efficiency, the code upgrade accidentally dismantled key mechanisms that previously maintained sUSD’s dollar ￰15￱ Do Billion-Dollar Stablecoins Keep Losing Their Peg?

In October 2023, TrueUSD, a major fiat-collateralized stablecoin, lost its peg after announcing suspended minting activities through technology partner Prime ￰16￱ TUSD holders interpreted the minting suspension as evidence that the company couldn’t maintain adequate fiat collateral ￰17￱ dramatic collapse of terraUSD (UST) and the entire Terra (LUNA) ecosystem in 2022 continues to cast doubt on stablecoin ￰18￱ founder Do Kwon and the Luna Foundation Guard spent up to 80,000 bitcoin , worth approximately $9.2 billion, in an attempt to defend UST’s dollar peg before ultimately ￰19￱ People’s Bank of China Governor Zhou Xiaochuan has now warned that stablecoins face a one-in-three collapse probability over the next decade due to crisis-induced arbitrage ￰20￱ cautioned that even fully-backed stablecoins can amplify risk through deposit-lending, collateralized financing, and asset trading ￰21￱ aren’t all the ￰22￱ see “$1” across USDC, USDT, PYUSD, FDUSD, crvUSD, GHO… Not every “$1” is created ￰23￱ difference? ￰24￱ can redeem, how fast, and at what quality of reserves.

Let’s break down stablecoin fragmentation & why settlement risk… ￰25￱ — DOLAK1NG (@DOLAK1NG) September 12, 2025 Zhou criticized inadequate reserve custody standards, citing Facebook’s early plans to self-custody Libra assets as a problematic ￰26￱ the Hong Kong Stablecoin Ordinance and ￰27￱ Act address some concerns, Zhou noted that regulatory gaps ￰28￱ recommended compiling actual circulation data to assess redemption risks, calling current oversight frameworks “far from sufficient.”