- Paxos accidentally minted $300 trillion of PayPal’s stablecoin.
- It’s not clear how the firm made such a colossal mistake.
- The firm applied for a banking charter in August.
Paxos’ erroneous creation of trillions worth of a stablecoin has left the crypto industry wondering how one of its biggest and most respected firms could make such a colossal error.
On Wednesday, the New York-based fintech minted $300 trillion worth of PYUSD, PayPal’s stablecoin, amid a series of strange transactions, onchain records show.
The incident “revealed problems in Paxos’s incident response,” according to Yehor Rudytsia, head of forensics and incident response at Hacken, a blockchain security firm.
“Paxos stated that they ‘immediately identified a problem,’ but it took 22 minutes to execute the burning of the erroneously minted tokens,” Rudytsia told DL News.
Trust charter bid
The blunder comes as Wall Street warms up to the crypto industry.
Banks and financial institutions are courting crypto firms and adopting blockchain technology at an unprecedented rate following landmark legislation in the US.
Paxos is among the firms at the heart of this convergence.
In August, it applied to convert its New York Department of Financial Services trust charter into a national charter under the supervision of the Office of the Comptroller of the Currency.
Doing so “will place Paxos under federal oversight and underscores its consistent commitment to maintain the highest regulatory standards of any blockchain infrastructure and tokenisation platform globally,” the firm said in a statement.
It’s unclear if Paxos’ $300 trillion minting error will impact the firm’s application.
Paxos did not respond to a request for comment.
$300 trillion blunder
To be sure, the $300 trillion never left Paxos’ internal crypto wallets and has since been removed from circulation.
“This was an internal technical error,” Paxos said in a statement. “There is no security breach. Customer funds are safe. We have addressed the root cause.”
But it’s not clear how Paxos made such a huge error in the first place, or why the firm’s internal systems were unable to prevent it from happening.
The minting error followed several other strange transactions.
Minutes before minting the $300 trillion, the same Paxos crypto wallet burned — or removed from circulation — $300 million PYUSD tokens.
It then minted and burned the $300 trillion before minting $300 million.
The series of transactions appears to show that Paxos intended to mint $300 million PYUSD tokens instead of the $300 trillion it ended up with.
Similar minting errors have happened before.
In 2019, USDT issuer Tether erroneously minted $5 billion of its stablecoin on the Tron blockchain instead of the intended $50 million, which then-chief technology officer Paolo Ardoino blamed on an issue with token decimals.
In 2023, Binance, the biggest crypto exchange, minted over $500 million worth of its Wrapped Ethereum token, WBETH, before burning them hours later.
Paxos’ erroneous $300 trillion mint, however, is the industry’s biggest ever minting error.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
