In an official statement shared via X (formerly Twitter), Paxos said:

“Paxos immediately identified the issue and resolved it by burning the excess PYUSD tokens. There was no security breach, and all customer funds remain safe.”

The incident highlights the sensitivity and automation risks involved in stablecoin issuance, even for regulated and enterprise-grade issuers like Paxos. Despite the brief turmoil, the company’s rapid response and transparency appear to have prevented further market disruption.

300 Trillion Dollars — A Number Bigger Than the Global Economy

According to Ethereum blockchain data, the error resulted in the minting of 300 trillion PYUSD tokens. Since PYUSD is pegged 1:1 to the U.S. dollar, this theoretically represented the creation of 300 trillion dollars — a sum that dwarfs the size of the global economy.

To put this into perspective, that figure far exceeds the United States’ national debt of roughly $37 trillion, and even surpasses the estimated $117 trillion global GDP.
Experts note that the incident once again highlights the limitations of automation and smart contract-based stablecoin systems, emphasizing the need for strong oversight and fail-safes in token issuance mechanisms.

Technical Details and Paxos’ Response

Data from Etherscan shows that the erroneous token minting originated from a Paxos-owned hot wallet and was directly sent to PayPal’s PYUSD smart contract.
The anomaly was detected around 3:12, and within approximately 30 minutes, the excess tokens were burned, restoring the proper supply balance. Paxos identified the root cause as a “technical inconsistency in the automated minting mechanism”, adding that the company has updated its internal security protocols to prevent similar incidents in the future.

While no user funds were affected and the system stabilized quickly, the episode underscores how even regulated, institution-backed stablecoins can experience vulnerabilities when automation meets large-scale financial infrastructure.

Temporary Shock in the DeFi Ecosystem

The Paxos incident caused a brief wave of panic across the decentralized finance (DeFi) ecosystem. Shortly after the event, Aave temporarily froze PYUSD markets as a precautionary measure to ensure platform security. The stablecoin’s price briefly deviated from its $1 peg, but quickly stabilized after the excess tokens were burned and the supply returned to normal levels. Following the fix, Paxos resumed normal operations, minting an additional 300 million PYUSD as part of its routine issuance process.

Renewed Debate on Transparency and Risk in Stablecoins

PYUSD currently ranks as the sixth-largest stablecoin globally, with a market capitalization of $2.6 billion. Although the incident showcased Paxos’s strong operational controls and effective crisis management, it also reignited discussions about technical risks, transparency, and auditing practices within the broader stablecoin industry.

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What is Global Dollar (USDG)?

USDG is a single-currency stablecoin pegged to the US dollar, fully redeemable from Paxos at a 1:1 ratio (1 USDG = 1 USD). Issued as an ERC-20 token on Ethereum and using standard token protocols on other MAS-approved blockchains, it ensures seamless integration with exchanges and third-party applications.

Key features of USDG include:

• Accessibility: Anyone with an Ethereum-compatible wallet can send or receive USDG, breaking down barriers to traditional banking access.

• Speed: Transactions settle in minutes on Ethereum and other high-speed networks, far faster than traditional fiat transfers that can take days.

• Programmability: Operating under ERC-20 rules, USDG supports smart contracts, enabling developers to build new use cases, products, and services.

• Stability: Pegged to the US dollar, USDG’s reserves are held in segregated accounts by PDS, protecting holders’ assets in the unlikely event of insolvency.

• Regulated Issuer: PDS holds a MAS Major Payment Institution license, offering digital payment token services and meeting stablecoin framework requirements for value stability, capital, par redemption, and disclosures.

USDG’s reserves, consisting of cash and cash equivalents, are held in segregated accounts; US dollars are T+0 liquid. US Treasury securities (USGs) with less than three months to maturity are highly liquid, while reverse repurchase agreements (repos) are overcollateralized with USGs and limited to one business day. Institutional Stable NAV USD Government Money Market Funds (MMFs) include cash, USGs, and overnight repos with a weighted average maturity (WAM) of 60 days and weighted average life (WAL) of 120 days.

Purpose of Global Dollar (USDG)

USDG aims to foster a fair and open financial system through regulated stablecoins. Over the past five years, the stablecoin market has grown 15x to over $160 billion, with projections to reach $3 trillion in the next five years. Blockchain advancements in speed and cost-efficiency make stablecoins ideal for payments and real-time money movement. Announcements like PayPal’s PYUSD and Stripe’s adoption of stablecoins for payments highlight strong enterprise demand.

Many existing stablecoins lack high regulatory standards, hindering enterprise adoption. USDG, under MAS oversight, offers robust consumer protection and compliance, reducing the cost and friction of enterprises issuing their own stablecoins. Its cash and cash-equivalent reserves are held in segregated accounts, safeguarding USDG holders in case of PDS insolvency.

How Does Global Dollar (USDG) Work?

USDG is issued and redeemed at a 1:1 ratio with USD; PDS mints tokens when funds are deposited into a reserve bank account. Other USDG transactions are managed by smart contracts under ERC-20 or approved blockchain protocols. The USDG smart contract is audited by independent third parties and viewable on Etherscan.

Reserves: USDG is fully redeemable, with reserves matching the circulating supply 1:1. Cash is held in segregated bank accounts; USGs with less than three months to maturity are liquid. Repos, overcollateralized with USGs, have a one-business-day maturity limit; MMFs include cash, USGs, and overnight repos with 60-day WAM and 120-day WAL.

Reserve Investment Policy: Paxos prioritizes asset safety and liquidity, implementing intraday liquidity management. Single-bank exposure, liquidity needs, and redemption timelines are assessed. The portfolio follows a buy-and-hold strategy, with liquid, short-maturity assets enabling flexible cash flow management.

Auditing and Verification: An independent accounting firm conducts monthly reserve attestations, published on the Paxos website and submitted to MAS. Verification includes: checking USDG total supply via blockchain, confirming USD balances with banks, matching internal PDS records, verifying reserve excess, drafting and signing reports, and publishing them.

Transaction Monitoring and Oversight: Continuous monitoring for fraud detection and prevention is performed using Chainalysis, with public blockchain transaction history accessible to all.

Global Dollar (USDG) Use Cases

USDG delivers the benefits of fiat-backed stablecoins: accessibility (available outside banking hours), access (usable with Ethereum wallets), speed (settles in minutes), and programmability (enables new smart contract applications).

USDG stands out from other USD stablecoins with: MAS-regulated issuance, partnerships with banks like DBS, experience issuing PayPal USD under New York Department of Financial Services, and issuance of Lift Dollar (USDL) under ADGM Financial Services Permission.

Risks: USDG or its reserves may be frozen, seized, or forfeited for illegal or sanctioned use. Consumer risks include: public blockchain delays, third-party software failures, irreversible transactions, and private key loss.

Global Dollar (USDG) Tokenomics

USDG is backed 1:1 with USD reserves, matching circulating supply. Reserves, held in segregated accounts with cash, USGs, repos, and MMFs, remain liquid. Monthly attestations, quarterly/annual audits, and on-demand verifications ensure transparency.

Global Dollar (USDG) Partners

Global Dollar (USDG) partners include a diverse range of finance and blockchain companies: 1Money, Aleo, Alfred, Alpaca, Amina, Anchorage Digital, Aquanow, Arculus, August, Beam, BiLira, Bitmart, Bitnet, Bitwyre, Bullish, Caliza, Coinmena, Coinmetro, Coinspaid, Dtc Pay, Equitiestracker, Facilita Pay, Fomo Pay, Galaxy, Gate, Hercle, Hifi, Huma, Kraken, Loopcrypto, Ltp, Merj, Midas, Noah, Nuvei, OKX, Onramp, OnRe, Orbital, Paribu, Paxos, Pdax, Rain, Rakkar, Robinhood, Sling Money, Swissborg, Toku, Topos, Trace Finance, Triple-a, Velocity, Wallectconnect, Worldpay, and Zodia Custody.

Global Dollar (USDG) Team

The Global Dollar Network is an open platform to accelerate USDG adoption, issued by PDS under MAS oversight. Paxos, a regulated stablecoin issuer since 2018, has minted over $120 billion in stablecoins. It operates under a New York Trust Charter and ADGM Financial Services Permission.

Official Links

• Website
• X (Twitter)
• Whitepaper

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What is Lift Dollar (USDL)?

Lift Dollar (USDL) is a stablecoin issued by Paxos Issuance MENA Ltd. (Paxos International) that distributes the yield from reserve assets to token holders. Subject to FSRA’s strict regulations, USDL is backed by cash and cash-equivalent assets and employs a daily rebasing mechanism to distribute yield. This mechanism automatically increases the token supply based on the yield rate of reserves, allowing users’ balances to grow without requiring any action. USDL aims to set a new standard in the stablecoin world by offering transparency, regulatory compliance, and a user-friendly economy. Yield distribution is not guaranteed but is optimized through conservative reserve management.

Lift Dollar (USDL) Key Features

USDL offers distinctive features in the stablecoin ecosystem:

1. Yield-Bearing Stablecoin

Yield from reserve assets is distributed daily to eligible token holders via a rebasing mechanism.

2. Regulatory Oversight

Strictly regulated by the FSRA, with reserve assets held in legally segregated accounts.

3. Transparent Reserve Management

Reserve assets consist of cash, U.S. government securities, and cash equivalents, verified through monthly independent audits.

4. One-to-One Redemption

USDL can always be redeemed from Paxos International at a 1:1 ratio for U.S. dollars.

5. Technological Innovation

As an Ethereum-based ERC-20 token, it ensures secure and transparent yield distribution through smart contracts.

6. Legal Safeguards

Reserve assets are held in segregated accounts for the benefit of token holders, in compliance with FSRA regulations.

7. Access Restrictions

Not available to users in the U.S. or certain prohibited jurisdictions, ensuring regulatory compliance.

How Does Lift Dollar (USDL) Work?

USDL operates as a yield-bearing stablecoin with the following process:

1. Acquisition: Eligible businesses can acquire USDL through Paxos International using fiat or other stablecoins; it is also available on global exchanges.

2. Yield Distribution: The rebasing mechanism increases token holders’ balances daily based on reserve yields.

3. Usage: USDL can be used like other stablecoins for payments, savings, or trading.

4. Redemption: Token holders can redeem USDL for U.S. dollars at a 1:1 ratio from Paxos International.

5. Reserve Management: Cash, U.S. government securities, and cash equivalents are stored in FSRA-approved financial institutions.

6. Auditing: Monthly independent audit reports verify the transparency and compliance of reserves.

7. Security: Transaction monitoring with Chainalysis and smart contract audits by Certik and Trail of Bits enhance security.

Lift Dollar (USDL) Benefits to Stakeholders

• Token Holders: Increase their balances through yield and benefit from the ease of stablecoin usage.

• Businesses: Optimize treasury management with seamless fiat and stablecoin conversions.

• Investors: Gain yield from a transparent and regulated stablecoin ecosystem.

• Financial Institutions: Offer secure and innovative services through USDL integration.

Lift Dollar (USDL) Tokenomics

USDL is a fixed-value ERC-20 token:

• Token Name: Lift Dollar (USDL)

• Token Type: Stablecoin (Governance and Yield Distribution)

• Total Supply: Variable, based on reserve assets

• Reserve Assets:

  • Cash (in segregated bank accounts)

  • U.S. government securities with three months or less maturity (minimum AA- credit rating)

  • Overnight reverse repurchase agreements collateralized by U.S. government securities

  • U.S. government money market funds with 60-day WAM and 120-day WAL

• Use Cases:

  • Yield Distribution: Sharing reserve yields via rebasing.

  • Payments: Transactions for payments and money transfers.

  • Redemption: One-to-one redemption for U.S. dollars.

  • Trading: Transactions on global exchanges.

Lift Dollar (USDL) Roadmap

USDL follows these steps to strengthen the stablecoin ecosystem:

• 2024: USDL launch and distribution on the Ethereum network, compliant with FSRA regulations.

• Future: Expansion to additional blockchain networks and optimization of yield distribution processes.

Lift Dollar (USDL) Investors and Partners

USDL is supported by Paxos International and collaborates with partners like Chainalysis, Certik, and Trail of Bits. Chainalysis provides transaction monitoring and risk assessment, while Certik and Trail of Bits enhance security through smart contract audits. Paxos International works with financial giants like PayPal, Mercado Libre, and Mastercard to expand stablecoin access.

Lift Dollar (USDL) Team

USDL is managed by Paxos Issuance MENA Ltd. (Paxos International), regulated by the FSRA in the Abu Dhabi Global Market. The company operates with an experienced treasury and portfolio management team and is recognized for its leadership in transparent reserve management and regulatory compliance.

Official Links

• Website
• X (Twitter)
• Whitepaper

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Jorn Lambert, Mastercard’s Chief Product Officer, described the initiative as a “360-degree approach” that enables consumers to spend stablecoins while allowing merchants to accept them with ease.

150 Million Merchants Can Now Accept Stablecoins

The stablecoin market has surged in the past year, reaching a total value of over $230 billion, a 54% increase year-over-year. USDT (Tether) and USDC (Circle) dominate around 90% of the market.

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According to a report by Artemis and Dune, active stablecoin wallets have grown by over 50% in the past 12 months. Investment bank Citigroup predicted in an April 23 report that the market could hit $3.7 trillion by 2030 due to regulatory clarity and growing institutional interest.

Partnerships With OKX and MetaMask Strengthen Card Utility

Beyond enabling merchants to receive stablecoins, Mastercard is also helping users spend them in the real world. The company launched the OKX Card in partnership with crypto exchange OKX, enabling seamless spending of digital assets.

On the same day, MetaMask and Mastercard revealed a crypto card that lets users make self-custodied payments via smart contracts, with transaction speeds under five seconds.

Mastercard has previously collaborated with Binance, Kraken, and Crypto.com on similar crypto-enabled debit card products.

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A company spokesperson stated, “This is an area Coinbase is actively exploring, though no final decision has been made yet.”

Other Crypto Firms Also Eyeing the Banking Sector

Recent reports suggest that Coinbase, along with major players like Circle, Paxos, and custody provider BitGo, may also be preparing to apply for a similar banking license in the US.

While Coinbase has not disclosed the exact reasons behind this potential move, such a license would enable crypto firms to offer traditional banking services, including accepting deposits and issuing loans. On the other hand, holding a federal charter would also bring tighter regulatory requirements and more rigorous reporting obligations.

A relevant example is Anchorage Digital, which already operates under a federal banking license. Despite this, Anchorage Digital Bank has recently come under investigation by the US Department of Homeland Security’s El Dorado Task Force.

Regulatory Landscape Shifting, Interest Increasing

These developments follow the preliminary approval granted by the US Office of the Comptroller of the Currency to Paxos back in 2021. The current more accommodating stance of US regulators and the growing willingness to integrate stablecoins into the broader financial system have prompted more crypto firms to consider applying for such licenses.

Federal Reserve Chair Jerome Powell recently emphasized that with the mainstream adoption of digital assets, it is a “sensible step” to establish a legal framework for stablecoins, noting that crypto has demonstrated consumer use cases with significant appeal.

Stablecoin Regulations Gaining Momentum

In April, the US House Financial Services Committee approved the Republican-backed Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, which aims to subject stablecoin issuers to stricter oversight.

Additionally, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act is progressing through the legislative process. While both bills seek to regulate the stablecoin space, they offer differing approaches.

The GENIUS Act focuses on establishing a legal structure for stablecoin payments and enhancing the global status of the US dollar. It also introduces requirements related to anti-money laundering, liquidity standards, and sanctions compliance.

Meanwhile, the STABLE Act proposes a two-year moratorium on issuing collateral-backed stablecoins linked to self-issued digital assets, and mandates that reserves be held separately from company funds.

As crypto regulation continues to evolve in the United States, Coinbase’s interest in a banking license underscores the accelerating convergence of digital assets and traditional finance.

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Securing a bank charter would enable these companies to legally offer deposit and loan services, aligning them with traditional financial institutions. With increasing scrutiny from regulators, especially in the stablecoin space, obtaining such licenses is seen as a crucial step toward long-term regulatory compliance.

STABLE and GENIUS Acts Reshape the Legal Framework

Two new U.S. legislative proposals — the STABLE Act and the GENIUS Act — aim to define how stablecoins are issued and regulated. While STABLE calls for strict federal oversight, GENIUS proposes a more flexible model that includes both state and federal governance.

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These bills would formally classify stablecoin issuers as financial institutions under the Bank Secrecy Act, requiring compliance with AML standards, sanctions checks, and reserve requirements.

A Bank Charter Comes with Opportunity and Risk

A bank charter offers crypto companies a pathway to legitimacy and growth, but also demands strict regulatory compliance. The case of Anchorage Digital, which obtained a federal charter but now faces investigation and high compliance costs, serves as a cautionary tale.

Even so, Federal Reserve Chair Jerome Powell recently acknowledged the importance of creating a legal framework for stablecoins, citing the growing relevance of digital assets in the broader financial ecosystem.

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CBDC Anti-Surveillance Law Reintroduced

On March 6, Emmer reintroduced the CBDC Anti-Surveillance State Act in the House of Representatives. At the March 11 hearing, Emmer renewed his call for Congress to pass the legislation. The bill aims to prevent future administrations from launching a US CBDC without explicit Congressional approval.

Emmer stated that CBDC technology is inherently “un-American”, warning that allowing unelected bureaucrats to issue a CBDC “could upend the American way of life.”

On January 23, Donald Trump signed an executive order prohibiting “the establishment, issuance, circulation, and use” of a CBDC in America. Emmer said that his reintroduced legislation could “prevent a future administration from creating such an obvious tool for financial surveillance against its own citizens” if signed into law, citing concerns about privacy and financial independence.

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Paxos CEO Calls for Stablecoin Regulations

At the same hearing, Paxos CEO Charles Cascarilla urged lawmakers to create consistent stablecoin regulations across jurisdictions to avoid regulatory arbitrage. Paxos, a major stablecoin issuer, recommended clear guidelines and reciprocal rules with global regulators:

“We want to make sure we have the same set of rules in the US as we have around the world so that there isn’t some arbitrage that is possible to issue from another jurisdiction. And by having that same set of rules that everyone has to meet in order to access the US market, it will actually create a race to the top, not a race to the bottom.”

Emmer, a Minnesota Republican, also criticized CBDCs for their inherent privacy risks, stating that stablecoins could bring traditional finance on-chain at a global scale while preserving privacy:

“This underscores why we must prioritize pro-stablecoin legislation alongside anti-CBDC legislation.”

Crypto Companies’ Political Influence Grows

Amid rapid pro-crypto developments, a report by the Center for Political Accountability (CPA) raised concerns about the increasing political influence of crypto companies in America and potential risks to regulatory stability.

According to the March 7 report, cryptocurrency firms spent a cumulative $134 million on the 2024 US elections in “unchecked political spending,” raising concerns about transparency and regulatory capture.

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These statements came after the announcement that U.S. President Donald Trump plans to include digital assets like Bitcoin (BTC), Ethereum (ETH), XRP (XRP), Solana (SOL), and Cardano (ADA) in the country’s strategic cryptocurrency reserves.

ZachXBT highlighted the absence of stablecoins issued by Circle, Tether, and Paxos in major networks like Cardano and the XRP Ledger. According to him, if these issuers saw a “valuable opportunity” in those networks, they would have integrated their stablecoins into them.

Response from Cardano Foundation

Cardano Foundation CEO Frederik Gregaard stated that stablecoin integration is not the only factor determining a blockchain’s legitimacy. Gregaard emphasized that true legitimacy should rely on factors such as security, decentralization, sustainability, development activities, real-world usage, and community involvement.

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Gregaard noted that Cardano’s long-term goal is to build infrastructure capable of supporting global financial systems. He highlighted that the network is built on technical excellence, security, and scalability. However, he also mentioned that as Cardano’s adoption increases, he expects greater interest from major stablecoin issuers.

Gregaard also pointed out that despite stablecoins like Tether (USDT) and USD Coin (USDC) not being directly issued on Cardano, they can still be used within the ecosystem through the Wanchain Bridge.

Stablecoin Developments on XRP Ledger and Cardano

Although major stablecoin issuers are not directly present on the XRP Ledger and Cardano, both networks have seen stablecoin projects.

The RLUSD stablecoin, developed on the XRP Ledger, started trading on exchanges like Uphold, MoonPay, Archax, and CoinMENA after receiving approval from the New York Department of Financial Services on December 17, 2024. Ripple President Monica Long announced that RLUSD would soon be listed on more exchanges.

On the other hand, in the Cardano ecosystem, the ADA-backed and Shen (SHEN)-collateralized Djed (DJED) stablecoin was launched in 2022. According to CoinGecko data, DJED‘s market capitalization is at 4 million dollars. In 2024, Cardano integrated the fiat-backed USDM stablecoin. The USDM launch on March 18 is seen as a significant step by the community.

These developments show that, although major stablecoin issuers have not yet turned to these networks, stablecoins play an important role in the XRP Ledger and Cardano ecosystems.

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Paxos stated that the acquisition of Membrane Finance will support its goal of providing secure and compliant services to its customers in Europe.

Walter Hessert, Chief Strategy Officer at Paxos, noted that stablecoins are rapidly becoming a “mainstream” consumer product, and emphasized their aim to offer more comprehensive services to European customers through the acquisition of Membrane.

Membrane Finance is known for its EURe stablecoin, which is pegged to the euro. Launched in 2023, EURe is marketed as “Europe’s first and only fully reserved stablecoin and payment network with EU regulation.”

Paxos, based in the United States, is a regulated blockchain company that provides crypto brokerage and stablecoin management services. The company has assisted major firms such as Binance and PayPal in launching their own branded stablecoins.

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On November 5, Paxos announced that the new “open network” is designed to accelerate global adoption of stablecoins. Kraken’s co-CEO, Arjun Sethi, emphasized that a lack of competition in the regulated stablecoin market has hindered the industry from realizing its full potential. Sethi stated, “This new model will transform the sector by bringing more participants into the ecosystem.”

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Paxos launched the USDG stablecoin on November 1. This network aims to support global adoption of Paxos’ USDG stablecoin, reaching a broader audience. Currently, USDG is only available on the Ethereum blockchain, but Paxos plans to offer the stablecoin on other blockchains as regulations develop. This will allow users to access USDG across various platforms.

Paxos is entering the international market by issuing the USDG stablecoin from Singapore. The firm states that this product complies with the Monetary Authority of Singapore’s stablecoin framework. This alignment ensures users can transact in a secure and regulation-compliant environment.

Qualified entities will have the opportunity to join the Global Dollar Network by invitation. This initiative allows key players in the industry to come together and form a shared vision.

The U.S. dollar reserves backing the stablecoin are managed by DBS Bank, Singapore’s largest bank. This structure ensures the security of USDG’s backing mechanism. USDG is supported 1:1 by U.S. dollar reserves, including cash deposits and short-term U.S. government securities, allowing users to easily redeem their tokens for cash. This feature provides users with greater flexibility and security when trading with stablecoins.

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