Possibly the medal is plated and made of zinc and the plating is coming off. Someone here will know for sure.
Hello and welcome to the forum.
It's an original zinc medal but because its zinc the finish will be lost over time due to the qualities of the base metal.
I suspect in this case the finish has been absorbed and the peeling is actually the original factory lacquer coming off. Unfortunately there is nothing you can do about it, just take measures to prevent it worsening. Don't handle it, keep it in a stable environment etc.
Looking for LDO marked EK2s and items relating to U-406.....
A nice original, and welcome
"In all my years as a soldier, I have never seen men fight so hard." - SS Obergruppenfuhrer Wilhelm Bittrich - Arnhem