A $300 Trillion Fat-Finger Mistake Exposes Crypto’s Greatest Flaws

Paxos, which handles a cryptocurrency pegged to the dollar on behalf of PayPal (Eric Piermont/AFP via Getty Images)

Key Points

• Paxos accidentally minted $300 trillion of PYUSD, a PayPal stablecoin, on Wednesday, then burned the assets within 30 minutes.
• The incident, attributed to an internal technical error, highlights concerns about stablecoin minting processes and backing.
• The event underscores the centralized risks within stablecoins, contrasting with the decentralized nature of other cryptocurrencies.

Paxos, which handles a cryptocurrency pegged to the dollar on behalf of PayPal , accidentally digitally printed $300 trillion worth of the digital asset on Wednesday. Oopsie. That’s not a mistake that would happen outside crypto.

At 3:12 p.m. on Wednesday, Paxos “minted”—digitally printed—$300 trillion worth of PYUSD, the PayPal “stablecoin” pegged to the dollar that is backed by dollar deposits, Treasuries, and cash equivalents. Within 30 minutes the group “burned” or removed these assets from the blockchain, the decentralized ledger that underpins PYUSD and other cryptos like Bitcoin.

“Paxos immediately identified the error,” the company said in a post on social media site X. “This was an internal technical error. There is no security breach. Customer funds are safe. We have addressed the root cause.”

Barron’s has reached out to Paxos and PayPal for comment.

The incident had a limited impact on crypto markets, though it caused an eruption of speculation online over how such a fat-fingered mistake could have been made. More broadly, this underscores a number of key issues related to digital assets and the proliferation of stablecoins, which are systemically important to the crypto ecosystem.

Dollar-pegged stablecoins form the heart of the crypto economy and are widely used as a form of collateral in trading as well as a main on-ramp and off-ramp between fiat currency and crypto markets. It was the meltdown of stablecoin TerraUSD that caused a 2022 crypto crash and worries over the backing and dollar peg of Tether, the third-largest digital asset by market capitalization, have also rattled markets in the past.

The Paxos incident exposes how stablecoin issuers can mint coins first and back them later. The one-to-one backing of each dollar-pegged token with real dollar-backed assets like Treasuries is key to the stability of these digital assets, as well as their acceptance among regulators and lawmakers. That Paxos could mint an eye-watering $300 trillion worth sum so easily, and obviously without $300 trillion in backing, should raise eyebrows.

The incident also highlights the trade-offs between efficiency and safety. It’s often helpful that new tokens can be minted so quickly. But speed evidently comes at the expense of the laborious checks and balances which slow down central banks from issuing fiat currency but, in turn, protect the dollar.

That a single internal error could introduce an unbacked $300 trillion into the crypto ecosystem, even if briefly and with no untoward effects, makes clear that not all of crypto benefits from decentralization. While Bitcoin, for instance, is a decentralized asset, and wide swaths of the crypto industry pride themselves on decentralization, stablecoins and their issuers are centralized and thus carry concentrated risks.

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