While Paxos’ mismining of $300 trillion in PYUSD on Wednesday is undoubtedly alarming, it serves as a case study on why blockchain can shine in traditional banking.
On Wednesday, Paxos accidentally minted $300 trillion worth of PayPal USD (PYUSD) stablecoin, which it described as an “internal technical error.”
But importantly, blockchain allows those mistakes to be quickly identified and corrected.
The incident occurred at 7:12pm (UTC) on October 15th, and was discovered almost immediately by onlookers, resulting in the entire amount being burnt just 22 minutes later.
The same cannot be said for the traditional banking sector.
“Mistakes happen in every financial system. The difference with blockchain is that mistakes are visible, traceable, and immediately fixable,” Kate Cooper, CEO of OKX Australia, told Cointelegraph. “That transparency is a strength, not a weakness,” she added.
Mr Cooper, who spent nearly a decade as an executive at two of Australia’s largest banks before pivoting to cryptocurrencies, said the Paxos case highlights how the openness and transparency of blockchain can transform financial oversight.
“As a former banker, I believe this is proof that visibility builds trust. The same rails that expose mistakes can also strengthen governance and modernize the way value moves within the financial system.”
Level of accountability ‘unprecedented’ in traditional banking
Line Sachs, CEO of cross-chain stablecoin liquidity platform Eco, said blockchain offers a level of accountability rarely seen in traditional finance.
“Perhaps an overlooked aspect of the inevitable on-chain stablecoin economy is the benefit of transparency required of currency issuers. Although this was an extreme case, it is still beneficial,” Sachs 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 trading
In April 2024, Citigroup mistakenly credited a customer’s account with $81 trillion instead of $281, and it took several hours to reverse the transaction. The media didn’t learn about it until nearly 10 months later.
That same month, another Citigroup employee almost transferred $6 billion to a wealthy customer after pasting the customer’s account number into the payment amount box. 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 of its partners.
Of course, these incidents are the only ones that have been made public.
Paxos incident remains a ‘preventable mistake’
However, this incident shows that stablecoin companies need to strengthen operational and risk management around token issuance, Shahar Madar, vice president of security and trust products at Fireblocks, told Cointelegraph.
Related: Stablecoin market boom to $300 billion provides ‘rocket fuel’ for crypto rally
“Minting $300 trillion is an avoidable mistake. Stablecoin adoption is on the rise and all issuers must ensure that security policies governing the entire lifecycle of their tokens are in place.”
“Minting, transferring and writing are highly sensitive operations and there is no reason to compromise on ‘soft’ enforcement of processes and manual checks,” Madar added.
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