The accidental minting of $300 trillion PYUSD by Paxos on Wednesday, while certainly alarming, serves as a prime example of why blockchain technology could excel in traditional banking.
On Wednesday, Paxos inadvertently created $300 trillion worth of the PayPal USD (PYUSD) stablecoin, attributing it to an “internal technical error.”
Nonetheless, the significant factor is that the blockchain facilitated quick detection and resolution of the error.
This incident occurred on Oct. 15 at 7:12 pm UTC, and the entire amount was burned just 22 minutes later, with observers noticing it almost immediately.
Such rapid correction contrasts sharply with the traditional banking sector.
“Every financial system experiences errors — the distinction with blockchain is that they are visible, traceable, and can be swiftly corrected,” stated Kate Cooper, CEO of OKX Australia, in a conversation with Cointelegraph. “That transparency is a strength, not a flaw,” she emphasized.
Cooper, who held executive roles in two of Australia’s largest banks before transitioning to crypto, remarked that the Paxos incident illustrates how blockchain’s transparency and openness can revolutionize financial oversight.
“As a former banker, I believe this exemplifies that visibility fosters trust. The same infrastructure that reveals an error can also enhance governance and modernize the movement of value within the financial system.”
A level of accountability “unheard of” in traditional banking
Ryne Saxe, CEO of the crosschain stablecoin liquidity platform Eco, pointed out that blockchain provides a level of accountability seldom found in conventional finance.
“An often-overlooked facet of the forthcoming onchain stablecoin economy is the transparency required from monetary issuers. Although this was an extreme instance, it remains instructive,” Saxe told Cointelegraph.
“Such transparency, paired with real-time coordination, is unprecedented in today’s central banking system.”
Banks have a history of fat-finger transactions
In April 2024, Citigroup mistakenly credited $81 trillion to a client’s account instead of $281, taking hours to reverse the error. The incident didn’t come to public attention until nearly 10 months later.
In the same month, another Citigroup employee nearly transferred $6 billion to a wealth client after mistakenly placing a customer account number in the payment amount box. This incident, too, took 10 months to be reported publicly.
In 2015, Deutsche Bank also mistakenly transferred 28 billion euros ($32.66 billion) to one of its partners.
These occurrences are only a fraction of those made public.
Paxos incident still a “preventable mistake”
Nonetheless, the incident indicates that stablecoin companies must bolster operational controls and risk management regarding token issuance, as noted by Fireblocks’ vice president of security and trust products, Shahar Madar, in a conversation with Cointelegraph.
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“Minting $300 trillion is a mistake that could have been avoided. With stablecoin adoption on the rise, every issuer should ensure their security policies effectively govern the entire token lifecycle.”
“Minting, transferring, and burning are highly sensitive operations, and there is no justification for settling for lax enforcement of processes and manual checks,” Madar added.
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