Paraguayan President Santiago Peña announced his resignation on Thursday, deepening a political crisis set off by the collapse of digital lender Ueno Bank, one of the country's largest financial institutions.

Update (Nov. 5, 21:21 UTC): This article has been updated to include comments from X4T founder and CEO David Eisenmann and Tether CEO Paolo Ardoino.

In a video posted to X, Peña said he was stepping down to preserve the country's stability, social peace and democratic institutions. He added that his priority was protecting Paraguayans who had entrusted their savings to the financial system.

His announcement came two days after Paraguay's central bank announced resolution proceedings for Ueno Bank on Tuesday, after finding that the lender's solvency ratio had fallen below half of the 12% regulatory minimum.

Peña faced mounting political scrutiny over his former business ties to Grupo Vázquez, the conglomerate that controls Ueno Bank. According to the Associated Press, he remained a business partner of the group until March 2025. Peña has denied any wrongdoing, arguing that the controversy began as a regulatory matter before escalating into a political dispute.

According to Reuters, his resignation came as lawmakers debated impeachment proceedings over alleged conflicts of interest, misuse of pension funds and institutional cover-ups linked to Ueno Bank's collapse.

Peña, who was elected in April 2023 and took office that August, was serving a five-year term scheduled to end in 2028. Under Paraguay's Constitution, Vice President Pedro Alliana would succeed him for the remainder of the term if Congress accepts his resignation. Congress's decision on whether to accept the resignation is the next procedural step in determining Paraguay's leadership through the end of the term in 2028.

The banking turmoil also coincided with elevated asking prices for Tether's USDt stablecoin on Bybit's Paraguay peer-to-peer marketplace. One listing viewed early Thursday offered USDt at 6,942 Paraguayan guaraníes, approximately 13% above the central bank's Nov. 4 reference rate of 6,144 guaraníes per US dollar.

Ueno Bank's collapse affects millions of customers

Ueno Bank had grown rapidly since 2021 into one of Paraguay's largest financial institutions, serving more than 3 million customers in a country of roughly 6.5 million people — a customer base equivalent to nearly half the population.

The lender first came under regulatory scrutiny in June over loans to companies linked to its controlling shareholder, Grupo Vázquez. In an October statement, the bank acknowledged receiving regulatory notices on June 5 and July 24 requiring adjustments to its related-party lending exposure.

On Nov. 2, the Central Bank of Paraguay initiated resolution proceedings after adjustments to the bank's financial statements pushed its solvency ratio down to 5.56%, less than half of the 12% regulatory minimum. Authorities suspended the bank's operations, restricting customers' access to their deposits.

Crypto users tap digital assets for liquidity

David Eisenmann, founder and CEO of Paraguayan crypto exchange X4T, told Cointelegraph that customers are turning to crypto to pay bills and protect their savings amid the banking crisis. Some are cashing out their holdings into guaraníes or US dollars to pay salaries and settle debts, while others are buying dollar-backed stablecoins.

“Customers are turning to their crypto holdings and converting them into guaraníes or dollars to make payments they couldn't make with their bank deposits,” he said. “When that access is restricted, people look for other sources of liquidity.”

On X4T, USDT and USDC prices in guaraníes have risen about 8% in recent weeks, Eisenmann said, reflecting the dollar's gains against the local currency. That recovery began in October and accelerated this week, he added, so the increase could not be attributed entirely to Ueno Bank's collapse.

Central bank data shows the US dollar gained about 1.6% against the guaraní between Oct. 1 and the month's final trading day. Despite its rally this week, it remained about 2.8% below its level earlier in 2026.

Tether CEO Paolo Ardoino also weighed in, writing on X that “USDt is a lifeline for hundreds millions of people in the world,” in response to Cointelegraph's coverage of the banking turmoil.

Depositor payouts begin amid protests

On Thursday, Paraguay's central bank announced that it would start deposit guarantee payments to eligible clients with balances of up to 10 million guaraníes (about $1,630), provided they had no outstanding debts to Ueno and held accounts at other financial institutions.

Under the country's deposit insurance system, deposits are protected up to 228.3 million guaraníes (about $37,200) per depositor, per financial institution. The eligibility conditions meant Thursday's initial payments covered only part of the bank's depositor base.

The bank's collapse sparked protests in the nation's capital, Asunción, where hundreds of depositors, pensioners and workers demanded the return of their savings and accountability from government officials.

Paraguayan authorities detained eight Ueno Bank executives on Nov. 3, including Grupo Vázquez president Miguel Vázquez and bank president Juan Manuel Gustale, according to local newspaper ABC Color. A court subsequently ordered six executives held in pretrial detention and placed two others under house arrest. Their legal cases and the central bank's resolution proceedings remain ongoing.