The New York Department of Financial Services (NYDFS) has confirmed that Paxos, the regulated issuer behind PayPal USD (PYUSD), accidentally minted an eye-watering $300 trillion worth of unbacked stablecoins on 15 October 2025.
The incident, which briefly expanded PYUSD’s supply to exceed the size of the global economy, sent shockwaves through both traditional finance and the crypto sector.
According to the NYDFS, the agency is in contact with both Paxos and PayPal to investigate the mishap. While Paxos has since burned the excess tokens within an hour and assured that no user funds were affected, the regulator described the event as a “material operational lapse” that underscores vulnerabilities in the stablecoin ecosystem.
The error reportedly began as a routine $300 million transfer between Paxos-controlled wallets. However, during the process of reversing a previous burn, a critical input mistake led to the accidental creation of $300 trillion PYUSD, a thousandfold error that briefly skewed on-chain metrics before being rectified.
From $300 Million to $300 Trillion: How a Routine Transfer Went Wrong
On-chain data suggests the chain of events started when Paxos attempted to remint tokens that had been mistakenly burned. A former Salesforce engineer, Sam Ramirez, explained that while the company meant to restore $300 million in PYUSD, the internal script misfired, resulting in an issuance of 300 trillion tokens instead.
Though the overmint was quickly identified and reversed, the episode raised immediate concerns about manual intervention in token issuance, a process that ideally should rely on immutable and automated validation.
Industry observers have since compared Paxos’ mishap to Citigroup’s notorious “fat-finger” error in 2024, where the bank mistakenly credited a client with $81 trillion. Yet, while Citigroup’s mistake remained confined to internal ledgers, Paxos’ event played out on a public blockchain, visible to the entire crypto community in real-time.
Proof of Reserves Debate Rekindled
The Paxos incident has reignited discussions on the need for real-time proof-of-reserves (PoR) in stablecoin operations. Chainlink’s community liaison, Zach Rynes, was among the first to comment, arguing that the mishap could have been entirely prevented with automated validation safeguards.
“This is a perfect example of why Chainlink Proof of Reserve should be integrated directly into the minting function of any stablecoin,” Rynes said. “It ensures that no tokens can be created unless verified off-chain collateral exists to back them.”
Rynes’ comments have amplified calls across the crypto industry for mandatory PoR integration, with analysts suggesting that regulators may soon require real-time issuance checks and collateral validation to prevent similar incidents.
Such measures, they argue, would prevent “infinite mint” scenarios, where unbacked tokens could be accidentally or maliciously created, destabilising broader markets in the process.
Industry Reaction and Regulatory Repercussions
The incident quickly became a trending topic across social platforms, with financial blog Zero Hedge questioning, “What exactly was this $300 trillion in stablecoin collateralised by mistakenly or otherwise?”
Other DeFi researchers raised deeper concerns about the timing of the event, which occurred shortly after PayPal’s $1 billion liquidity partnership announcement and PYUSD’s alignment with tokenized Treasury assets. Some analysts speculated that the “error” coincided suspiciously with infrastructure updates connecting PayPal’s digital assets to traditional finance rails.
Data firm Santiment reported that while the overmint was swiftly corrected, it drew “significant on-chain attention” and served as a stark reminder of how easily stablecoin issuance mechanisms can be disrupted by human error.
The total market capitalisation of stablecoins currently hovers around $310 billion, making them one of crypto’s most systemically important sectors. The Paxos incident could thus accelerate regulatory initiatives to enforce automated minting controls, continuous auditing and transparency in collateral management.
A Wake-Up Call for the Stablecoin Industry
Paxos has maintained that all systems have since been audited and reinforced. “No funds were lost, no breach occurred and the overminted tokens were immediately burned,” a company spokesperson stated.
However, regulators and industry experts alike see the event as more than a harmless typo. It underscores how manual processes and insufficient safeguards could threaten market integrity, even under the watch of regulated issuers.
As one analyst put it: “If one misplaced zero can mint $300 trillion, the biggest risk to stablecoins isn’t hackers anymore, it’s the people operating them.”
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