Paxos’ erroneous minting of $300 trillion in PYUSD on Wednesday, while certainly alarming, exemplifies why blockchain could excel in conventional banking.
On Wednesday, Paxos unintentionally created $300 trillion worth of the PayPal USD (PYUSD) stablecoin, labeling it an “internal technical error.”
What’s crucial, however, is that blockchain facilitated the quick identification and rectification of this error.
The incident occurred on Oct. 15 at 7:12 pm UTC, and the entire sum was burned just 22 minutes later, with observers noticing it almost immediately.
The same could not be said for traditional banking.
“Mistakes happen in every financial system — the distinction with blockchain is that they’re visible, traceable, and can be corrected swiftly,” Kate Cooper, CEO of OKX Australia, explained to Cointelegraph. “That transparency is a strength, not a flaw,” she added.
Cooper, who spent nearly a decade as an executive at two of Australia’s major banks before transitioning to crypto, stated that the Paxos incident underscores how blockchain’s transparency can revolutionize financial oversight.
“As a former banker, I see this as evidence that visibility fosters trust. The same framework that reveals an error can also enhance governance and modernize value transfer in the financial ecosystem.”
A level of accountability “unheard of” in traditional banking
Ryne Saxe, CEO of the crosschain stablecoin liquidity platform Eco, highlighted that blockchain provides a level of accountability seldom seen in traditional finance.
“An often-overlooked aspect of the forthcoming onchain stablecoin economy is the transparency required from monetary issuers. This was an extreme case, but it’s still informative,” Saxe told Cointelegraph.
“This level of transparency, and real-time coordination, is unprecedented in today’s central banking economy.”
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 transaction. The media remained unaware until nearly 10 months later.
In the same month, another Citigroup employee almost transferred $6 billion to a wealth client after mistakenly placing a customer account number in the payment amount box. It took 10 months for this incident to surface in reports as well.
In 2015, Deutsche Bank also mistakenly sent 28 billion euros ($32.66 billion) to one of its partners.
These incidents are merely the ones that have been made public.
Paxos incident still a “preventable mistake”
Nevertheless, the incident demonstrates that stablecoin providers must strengthen operational controls and risk management related to token issuance, remarked Shahar Madar, vice president of security and trust products at Fireblocks, to Cointelegraph.
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“Minting $300 trillion is a preventable mistake. With stablecoin adoption on the rise, every issuer should ensure their security policies are firmly established to govern the entire token lifecycle.”
“Minting, transferring, and burning are highly sensitive operations, and there is no justification for lax enforcement of processes and manual checks,” Madar added.
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