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PayPal

Chain Reaction: Fake PayPal USD Tokens Flood Blockchains After Stablecoin Launch

Christian Encila
by Christian Encila
2 years ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Fraudsters are actively attempting to deceive unsuspecting individuals by exploiting the introduction of the recent dollar-anchored stablecoin of PayPal, known as PayPal USD (PYUSD). They carry out their nefarious ways by releasing counterfeit tokens across various blockchain networks.

As of Tuesday, data from DEXTools reveals that more than 66 counterfeit tokens have emerged on networks such as Ethereum, BNB Chain, and Base. The majority of these bogus tokens have been introduced on Ethereum, where the genuine PYUSD token is established.

Related Reading: Ethereum Museum Makeover: A Solution For Curbing Artifacts Hoarding?

The most prominent imitation of the PYUSD token, generated on the Ethereum network, has experienced a remarkable trading volume of $2.6 million shortly after PayPal’s stablecoin launch announcement.

Despite initially rallying by an astonishing 30,000% within the first eight hours, the token’s value has subsequently plummeted by more than 66% from its peak.

PayPal: Foray Into Stablecoins

PayPal, a prominent payment entity headquartered in New York, disclosed its intentions on Monday to make the PayPal USD (PYUSD) stablecoin accessible to its users. This move marks a significant milestone as a major financial institution ventures into creating its own stablecoin.

Users will be able to transfer PYUSD between PayPal and supported external digital wallets, utilizing the tokens for transactions and converting them between PayPal’s endorsed cryptocurrencies and PYUSD.

The market cap of cryptocurrencies is currently at $1.13 trillion. Chart: TradingView.com

PayPal’s announcement not only propelled its shares up by 2.66% on Monday but also showcases its confidence in the cryptocurrency industry, which has faced regulatory challenges over the past year, compounded by high-profile collapses.

Despite the existence of stablecoins, which are crypto tokens linked to stable assets to mitigate volatility, for several years, they have not yet gained significant traction in the mainstream consumer payments landscape.

Instead, stablecoins are mostly utilized for trading other cryptocurrencies like bitcoin and ether. The largest stablecoin by market cap is Tether, followed by USD Coin, issued by Circle.

 Top 5 stablecoins by market cap. Chart: CoinGecko

Exploiting The Hype: Scammers & Opportunists

A considerable number of the counterfeit PYUSD tokens are likely to be “honeypots,” a term implying that once investors acquire these tokens, they are unable to sell them, essentially relinquishing their crypto holdings.

The strategy employed involves creating a token named “PYUSD,” adding liquidity with ether or another token, and offering it to users on decentralized exchanges. This is feasible because anyone can employ a smart contract to generate tokens on Ethereum or other blockchains at a minimal cost. The presence of decentralized exchanges facilitates the swift issuance, liquidity provision, and trading of these tokens.

The majority of these tokens are likely procured by their creators after issuance, creating the illusion of a trending token while functioning as a honeypot in reality. This scheme can result in a few thousand dollars in profit for these developers in a short span, albeit through an entirely unethical way.

Related Reading: PayPal USD Debut: Why Its New Stablecoin Is Triggering Apprehension

In some cases, developers might withdraw all liquidity from these counterfeit tokens shortly after issuance, leading to a 100% price drop and leaving investors with worthless tokens.

Furthermore, opportunistic individuals have been known to swiftly create new meme tokens to take advantage of popular narratives and events. For instance, one token humorously named “PepeYieldUnibotSatoshiDoge” witnessed a surge of over 3,000% in value within four hours, exploiting the buzz around PayPal’s stablecoin introduction.

Featured image from Road.cc

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Christian Encila

Christian Encila

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Christian, a journalist and editor with leadership roles in Philippine and Canadian media, is fueled by his love for writing and cryptocurrency. Off-screen, he's a cook and cinephile who's constantly intrigued by the size of the universe.

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