While Paxos' accidental minting of PYUSD 300 trillion on Wednesday is undoubtedly concerning, it serves as a case study for why blockchain could shine in traditional banking.
On Wednesday, Paxos mistakenly minted the $300 trillion stablecoin PayPal USD (PYUSD), describing it as an “internal technical error.”
Importantly, nonetheless, the blockchain made it possible to quickly detect and proper their error.
The incident occurred on October 15 at 19:12 UTC and the whole crowd was burned just 22 minutes later as spectators noticed it almost immediately.
Source: Ted Pillows
The same can’t be said for the normal banking sector.
“Mistakes occur in every economic system – the difference with blockchain is that they’re visible, traceable and quickly correctable,” Kate Cooper, CEO of OKX Australia, told Cointelegraph. “This transparency is a strength, not a flaw,” she added.
Cooper, who spent nearly a decade as an executive at two of Australia's largest banks before turning to cryptocurrency, said the Paxos incident showed how the openness and transparency of blockchain could transform financial regulation.
“As a former banker, I see this as evidence that transparency breeds trust. The same rails that expose failure may strengthen governance and modernize the best way value moves through the economic system.”
A level of accountability that’s “unheard of” in traditional banking
Ryne Saxe, the CEO of cross-chain stablecoin liquidity platform Eco, noted that blockchain offers a level of accountability rarely present in traditional finance.
“A perhaps missed aspect of the inevitable on-chain stablecoin economy is the advantage of the transparency required by currency issuers. This was an extreme case, nevertheless it continues to be instructive,” Saxe told Cointelegraph.
“This level of transparency and real-time coordination is unprecedented in today’s central bank economy.”
Banks have a history of fat-finger transactions
In April 2024, Citigroup by chance credited a customer account with $81 trillion as a substitute of $281 trillion, taking hours to reverse the transaction. The media didn't discover about it until almost ten months later.
That same month, one other Citigroup worker transferred nearly $6 billion to a wealth client after inserting a client's account number into the payment amount field. It also took 10 months for the incident to be reported.
In 2015, Deutsche Bank also mistakenly transferred 28 billion euros ($32.66 billion) to one in all its partners.
Of course, these incidents are only those which were made public.
Paxos incident still an “avoidable mistake”
However, the incident shows that stablecoin firms have to tighten operational controls and risk management around token issuance, Shahar Madar, vice chairman of security and trust products at Fireblocks, told Cointelegraph.
“Minting $300 trillion is an avoidable mistake. Stablecoin adoption is increasing and each issuer should ensure their security policies are properly established to manipulate the whole token lifecycle.”
“Mint, transfer and burn are highly sensitive operations and there isn’t a reason to accept 'soft' enforcement of processes and manual controls,” Madar added.
