The United States has 300 trillion U.S. dollars of counterfeit currency (equivalent to 2 times the world’s annual GDP) Phantom: A full investigation into the largest stablecoin minting incident in the history of Paxos

(Source: Shanglinxiaxi)

Event Overview: 22 Minutes of a $300 Trillion Phantom

　　 At 7:12 pm UTC time on October 15, 2025 (3:12 am Beijing time on October 16), the blockchain monitoring platform discovered an abnormal transaction on the Ethereum network. Stablecoin issuer Paxos is on its official contract address300 trillion PYUSD stablecoins were minted at once. Based on the one-to-one U.S. dollar peg value designed by PYUSD, the nominal value of this newly minted token is as high as approximately$300 trillionthis number is even more than twice the combined GDP of all countries in the world according to the International Monetary Fund. 22 minutes after the abnormal transaction occurred, Paxos transferred all 300 trillion PYUSD to an inaccessible blockchain address for permanent destruction (i.e., a “black hole” address).

　　 This incident quickly attracted attention in the cryptocurrency market. Omer Goldberg, the founder of the decentralized lending protocol Aave, posted on the X platform immediately after the incident that Aave wouldTemporarily freeze PYUSD transactionsto assess risk. Paxos subsequently issued an official statement, characterizing the incident as “an excessive amount of PYUSD was mistakenly minted during the internal transfer process.” It was an internal technical error and did not involve a security vulnerability, and emphasized that customer funds were safe.

　　 It is important to clarify that although the $300 trillion figure is shocking, this eventIt has not had a substantial impact on the market price stability of PYUSD.. According to Nansen data monitoring, PYUSD maintained its anchor relationship with the US dollar after the incident, and the price only briefly fell by about 0.5%, and then quickly returned to normal levels. This shows that the market generally regards this event as a technical operation error rather than a systemic risk, and also reflects the ability of mature market participants to identify abnormal events.

Key technical details and transaction records

According to blockchain data, the specific transaction records of this abnormal event are as follows:

　　Mint transaction hash:

0xc45dd1a77c05d9ae5b2284eea5393ecce2ac8a7e88e973c6ba3fe7a18bf45634

　　Destroy transaction hash:

0xaa532ae7f06cccdbdc226f59b68733ae8594464a98e128365f8170e305c34f4b

　　PYUSD contract address:

0x6c3ea9036406852006290770BEdFcAbA0e23A0e8

　　Paxos control address:

0x2fb074FA59c9294c71246825C1c9A0c7782d41a4

Table: Complete timeline of PYUSD abnormal casting events

In-depth analysis of technical loopholes: lack of smart contract permissions and risk control

Smart contract authority design and centralized control

　　 As an ERC-20 token based on the Ethereum blockchain, PYUSD's issuance and destruction mechanism is completely controlled by smart contracts. However, unlike fully decentralized cryptocurrencies, PYUSD’sCentralized control authority is retained in the contract design. According to its technical documentation, the PYUSD contract includes a series of management functions, including: permissions such as pause (stop all on-chain transmissions), freeze (prevent specific addresses from transferring funds), and wipe (permanently delete tokens in frozen addresses). Although these control functions are contrary to the decentralization concept of cryptocurrency, they areRegulated StablecoinsHowever, it is necessary to operate compliantly, enabling it to respond to legal orders (such as court-mandated asset freezes or sanctions enforcement).

　　 In this incident, it was this centralized contract authority that enabled Paxos to quickly destroy all mistakenly minted tokens after discovering the error. It is worth noting that Paxos, as a limited purpose trust company regulated by the New York State Department of Financial Services (NYDFS),Every step of the operation is under supervisionwhich is also the institutional basis for its ability to respond quickly and handle errors.

Internal risk control process vulnerability analysis

According to Paxos' official statement, the incident was caused by “an excessive amount of PYUSD being mistakenly minted during an internal transfer process.” From a technical operational perspective, this exposed major loopholes in Paxos’s internal risk control process:

　　Missing amount threshold check: A normal stablecoin minting system should set upper limit thresholds for single minting and single-day cumulative minting, but Paxos's system obviously failed to effectively intercept the abnormal value of 300 trillion.

　　Missing multi-signature confirmation mechanism: For large-scale casting operations, a multi-signature mechanism should be used, which requires multiple authorized personnel to confirm before execution. However, this incident suggests that there may beA single operator can perform large-amount castingsrisk points.

　　Operation review process is missing: Before a blockchain transaction is broadcast, there should be a review process independent of the operator to confirm the transaction details. It took 22 minutes for the error to be discovered and corrected, indicating that the real-time monitoring mechanism was not sensitive enough.

Full process operation restoration and legal liability analysis

Event timeline and operation process

　　 The entire event process clearly reflects the power of blockchain technologyTransparency advantage: All operations are permanently recorded on the Ethereum public ledger and can be queried and verified by anyone. This kind of transparency is difficult to achieve with traditional financial systems and is one of the core values ​​of blockchain technology.

　　From a technical process perspective, the minting of stablecoins usually follows the following steps: the institution deposits US dollars into a designated bank account → issues a minting request to Paxos → Paxos verifies the arrival of the funds and calls the minting function of the smart contract → new tokens are generated and transferred to the specified address. However, this time the minting of 300 trillion PYUSDThere is no corresponding U.S. dollar financial supportis purely an operational error, which also raises questions about the stablecoin mortgage mechanism. As Zerohedge questioned on social media: “When this $300 trillion 'stablecoin' is mistakenly minted, what exactly is it collateralized by?”

The legal significance and liability determination of destruction operations

　　Paxos quickly destroyed all the mistakenly minted tokens after discovering the error. This operationReduce the possible consequences of the incidentbut it does not completely exempt it from legal liability. From a legal perspective, the destruction operation can be regarded as a correction of errors, indicating that the company has no malicious intention to issue additional currency, butDoes not change the fact that the error has occurred.

　　 According to the U.S. legal framework, specifically the New York State Department of Financial Services (NYDFS) regulation of digital assets, stablecoin issuers are responsible for ensuring the stability and security of the system. Even if the error is corrected promptly, Paxos may still beLack of internal risk controland face regulatory accountability. In similar situations, regulators typically conduct the following investigations:

　　Specific reasons for operational errors: Is it a technical glitch or human error?

　　Effectiveness of the company’s internal risk control system: Are there systemic risk control deficiencies?

　　Event handling timeliness and transparency: Is it reported and handled in a timely manner according to prescribed procedures?

Regulatory Framework and Accountability Mechanism: New Trends in U.S. Stablecoin Regulation

U.S. Stablecoin Regulatory System

PYUSD is a stablecoin regulated by the New York State Department of Financial Services (NYDFS). Its issuer, Paxos, holds a New York State trust license and must comply with strict regulatory requirements. The U.S. stablecoin regulatory framework mainly includes the following elements:

　　Reserve requirements: Stablecoins must be fully collateralized by U.S. dollar deposits, short-term U.S. Treasury bills, and cash equivalents. Paxos is required to publish a monthly reserve report and have it audited by an independent accounting firm.

　　Compliance operational requirements: Including anti-money laundering (AML), know your customer (KYC) and other financial regulatory regulations.

　　risk management system: The issuer must establish a complete risk management system to ensure safe and stable operation of the system.

In this incident, NYDFS, as the main regulatory agency, has the right to review Paxos and take corresponding regulatory measures. Historically, NYDFS has required Paxos to stop minting the BUSD stablecoin in cooperation with Binance on the grounds of “inadequate anti-money laundering review”, which shows that the regulator has concerns about stablecoin issuers.Ongoing monitoring and accountability mechanisms.

　　Table: Core elements of the U.S. stablecoin regulatory framework in 2025

Possible legal liability of Paxos

Although Paxos quickly destroys erroneously minted tokens, it may still face legal liability for the following:

　　regulatory penalties: NYDFS may impose a fine on Paxos and require it to submit a detailed rectification report and strengthen internal risk control. For example, in 2023, Paxos was fined by NYDFS and required to make rectifications due to compliance issues in the BUSD project.

　　administrative penalty: If the U.S. Securities and Exchange Commission (SEC) determines that PYUSD is a security, it may initiate investigation procedures. However, when PayPal launched PYUSD, it made it clear that it would not provide income to users, which to some extent reduced the possibility of it being recognized as a security.

　　civil liability: If other market participants suffer actual losses due to this incident, they may file a civil lawsuit against Paxos.

It is worth emphasizing thatDestruction operations cannot completely exempt legal liability. Regulators focus on the effectiveness and compliance of the risk control system, rather than the results of a single incident.

Market Impact and Industry Response: Deep Enlightenment Behind a False Alarm

Impact assessment on the market

　　Although the figure of 300 trillion PYUSD is shocking, the impact of this incident on the cryptocurrency marketThe actual impact is quite limited. According to market data, PYUSD maintained its peg to the U.S. dollar after the incident, and the price only briefly fell by about 0.5%. This relatively mild market reaction may be due to the following factors:

　　Errors corrected quickly: The destruction was completed within 22 minutes, showing that the issuer has an effective emergency mechanism.

　　Transparent and open processing: Paxos releases announcements quickly to avoid the spread of uncertainty.

　　Increased market maturity: Cryptocurrency market participants are increasingly developing the ability to identify unusual events.

Compared with real stablecoin crises in history (such as USDC’s brief de-anchoring in 2023 due to the Silicon Valley Bank incident), this incidentNo systemic risks. This reflects the increasing maturity of the stablecoin market, and investors are better able to distinguish between technical errors and systemic risks.

Official and industry authoritative responses

　　Paxos official statement(Within 1 hour after the incident):

“This is an excessive amount of PYUSD being minted by mistake during the internal transfer process. It is an internal technical error and does not involve a security vulnerability. Customer funds are safe. We have solved the root cause.”

　　Aave founder Omer GoldbergResponse on X platform:

“Due to unexpected high-value transactions, Aave will temporarily freeze PYUSD transactions.”

　　Anders Helseth, Vice President of Cryptocurrency Research Company K33Comment:

“An important factor in the short term is whether exchanges adopt the PayPal stablecoin. I don't think this event will change the fundamentals of PYUSD.”

　　Circle CEO Jeremy AllaireComments on stablecoin regulation:

“It's incredibly exciting to see such an important internet and payments company enter the stablecoin space. This is what will happen when we start to clarify regulations…Customers will know who they are dealing with, and companies that can withstand the scrutiny of central banks and prudential regulators will thrive.”

　　CoinTelegraph reports:

Reporter Turner Wright pointed out that this incident looks like a typical “gold finger” error (ie, operational error).

　　Market analysis agency ZerohedgeSharp questions were raised to the Fed’s official account on social media:

“This should solve the funding shortage problem,” and questioned: “When this $300 trillion 'stablecoin' was mistakenly minted, what exactly was it collateralized by?”

These responses indicate that the industry views the incident as a controllable technical problem rather than a systemic risk. At the same time, mainstream stablecoin issuers took the opportunity to emphasize the importance of compliance and transparency.

Conclusion and industry implications: Technical errors rather than systemic scams

Event characterization: technical operation error, not evidence of scam

　　This Paxos abnormal casting incident is essentially a case ofTechnical operational errorsrather than evidence that digital currency as a class of assets is a “scam”. The core judgment basis includes:

　　Errors corrected quickly: Paxos discovered and corrected the error within 22 minutes, and all misminted tokens were destroyed.

　　No unjust enrichment: Rather than profiting from the error, the company incurred transaction costs and reputational risk from the mishandling.

　　Limited market impact: The price of PYUSD quickly returned to normal after a brief fluctuation, without triggering systemic risks.

This incident instead demonstrated the potential of blockchain technologyTransparency advantage: All operation records are publicly available and errors can be quickly discovered and corrected. Blockchain offers higher traceability and verifiability than traditional financial systems.

Industry improvement suggestions

To prevent similar incidents from happening again, the stablecoin industry can consider the following improvement measures:

　　technical level: Set a single casting limit, implement a multi-signature confirmation mechanism, and establish a real-time abnormal transaction monitoring system.

　　regulatory level: Clarify the reporting requirements for large-scale castings, introduce third-party auditing for real-time monitoring, and improve the emergency response process.

　　corporate governance: Strengthen the construction of the internal risk control system and conduct regular stress tests and emergency plan drills.

Table: Comparison and improvement directions of major stablecoin risk control measures

future outlook

This incident will not change the long-term development trend of the stablecoin market. On the contrary, it provides important learning opportunities and promotes the industry to improve its risk control system and regulatory framework. With the clarification of regulatory rules such as the Payment Stablecoin Act, the stablecoin market is expected toFurther standardization and institutionalization.

Patrick McHenry, Chairman of the U.S. House of Representatives Financial Services Committee, noted: “Clear regulations and strong consumer protections are critical for stablecoins to realize their full potential. This announcement is a clear signal that stablecoins – if issued under a clear regulatory framework – are poised to become the backbone of our 21st century payments system.”

　　 This Paxos incident should ultimately be viewed asA stress test in the maturation process of the industryrather than a signal of systemic risk. It shows that even when technical errors occur, sound systems and timely responses can effectively control risks. This is exactly the resilience that a healthy market should have.

Industry inspiration and deep thinking

The Trust Test of Stablecoin Mortgage Mechanism

　　 This incident triggered concerns about stablecoinsFundamental doubts about the mortgage mechanism. PYUSD claims to be 100% backed by U.S. dollar deposits, U.S. Treasury bonds and other assets. But this incident shows thatUnder certain circumstances, stablecoins can be created out of thin air without corresponding collateral. This shakes the value-anchoring promise of stablecoins and exposes the fundamental fragility of the current system.

Balancing technical soundness and financial stability

　　 This incident revealed deeper systemic vulnerabilities. It shows that stablecoin issuers are not just payment facilitators; they are actuallysystemically important financial infrastructurewhose operational risks may affect the stability of the entire crypto ecosystem. This $300 trillion incident is more like a crackdown on the digital financial system.stress test. It tells us that on the road to the future of digital finance, we not only need to embrace the courage to innovate, but also need to have the deepest awe for the risks hidden deep in the code.

　　 For regulators, the incident also underscores the need to enforce regulations on stablecoin issuers.Stronger technical risk control requirementsneed to focus not just on auditing its reserves. As the digital financial system continues to develop, technological robustness and financial stability must be advanced simultaneously to build a truly reliable future financial infrastructure.