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.
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.
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