Paxos Draws NYDFS Attention As $300 Trillion Minting Error Exposes Stablecoin Risks
The New York Department of Financial Services (NYDFS) confirmed today that Paxos, the issuer of PayPal USD (PYUSD), accidentally minted $300 trillion worth of unbacked stablecoins on October 15, 2025. The regulator added that it is in contact with both Paxos and PayPal regarding the incident.
The event, which momentarily expanded PYUSD’s supply beyond the size of the entire global economy, has triggered fresh scrutiny of the operational and systemic risks underpinning the stablecoin sector.
Paxos’ $300 Trillion Minting Error Exposes Major Risks in the Stablecoin IndustryAccording to on-chain data, the incident began as a routine transfer of $300 million between Paxos-controlled wallets.
The Information reports that the NYDFS highlighted the matter, citing a fat-finger incident more concerning than Citigroup’s mistake last year. As it happened, Citigroup’s mistake saw the investment banking company mistakenly credit a client with $81 trillion before reversing the transaction.
New York Department of Financial Services, which regulates Paxos, says it is "aware of the incident and is in contact with Paxos and PayPal." Earlier, Paxos mistakenly created $300 trillion PayPal stablecoins https://t.co/MyZ3vNFldS pic.twitter.com/TIozvRg2Is
— Yueqi Yang (@Yueqi_Yang) October 16, 2025A former Salesforce engineer, Sam Ramirez, explained Paxos’ move to undo their mistake. They tried to remint the 300 million they burned back into the original wallet. However, they messed up again and accidentally minted 300 trillion.
Some forensics on the the PYUSD token mint today. Its worse than I thought.
Looks like Paxos tried to transfer 300M PYUSD between wallets, but accidentally burned 300M instead.
So in order to undo their mistake, they tried to remint the 300M they burned back into the original… https://t.co/LGMbFM4zKR pic.twitter.com/r183LlzxtE
Within an hour, Paxos burned the excess supply, restored all balances, and confirmed that no customer funds were affected. The company also stated that no external breach occurred.
However, the sheer scale of the minting error has renewed concerns about the reliability of collateralization mechanisms. It also raises questions about manual oversight in stablecoin operations.
Chainlink’s community liaison, Zach Rynes, explained how proof of reserve (PoR) would have prevented this entire FUD.
“…this is a good example of a situation where Chainlink Proof of Reserve would have prevented this entire PR nightmare. Specifically, asset issuers can integrate Chainlink PoR into the minting function of their token contract as a validation check,” Rynes explained.
According to Rynes, the move would have prevented the issuance of additional tokens unless Chainlink PoR had first validated that there is a sufficient amount of off-chain reserves available to maintain 100% collateralization.
Ultimately, it would have prevented infinite mint attacks, where many unbacked tokens are minted, putting at risk all the markets that list and support the token.
Rynes’ remarks ignited industry debate over whether real-time proof-of-reserves validation should become mandatory for all regulated stablecoins.
Questions of Collateral and Conduct Arise in the Face of Market and Regulatory RepercussionsFinancial blog Zero Hedge quickly asked the question that many were thinking. Others also highlight the potential for deliberate misuse.
“…what exactly was this $300 trillion in ‘stablecoin’ collateralized by when it was minted, mistakenly or otherwise,” the popular account on X posed.
> mint $300T
> lend them for an hour at a mere 5% APY
> make $1.71B
> burn $300T, whoopsie we were doing a test transaction
> business https://t.co/If9cZurRtw pic.twitter.com/aWaFv6FTR4