On 5 October 2026, the Banco Central del Paraguay unveiled a new family of guaraní banknotes, presented by President Santiago Peña and governor Carlos Carvallo. The guaraní, Peña said, was “an expression of confidence”. Four weeks later both men had fallen — Carvallo arrested, Peña removed by the Senate and ordered into pretrial detention — and Paraguayans queued for their savings. The crisis is a live lesson in what a digital bank run looks like, and how cashMoney in physical form such as banknotes and coins. More keeps a bank failure from swallowing the wider economy.
Ueno was the emblem of the new Paraguay. Licensed in 2023, the digital lender grew on cashbackA service whereby the customer pays electronically a higher amount to a retailer than the value of the purchase for goods and/or services and receives the difference in cash. It is also a reward system associated with credit card usage, whereby the consumer receives a percentage of the amount spent on the credit card. More — a reward for paying digitally, offered by grocers and retailers — plus easy accounts for the unbanked. The rewards pulled in customers at extraordinary speed: by mid-2026 it had 2.9 million customers — 60% of the country’s adults — and nearly 9% of system deposits, including $800–850 million of public moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More. On 2 November, regulators found its capital below half the legal minimum once $146 million of insider loans and misbooked assets were corrected. The central bank seized it before dawn; the app, cards and transfers went dark.
The run went in two directions at once. The locked-out ran for banknotes — queues snaked around the shuttered branches, and by Wednesday a rush to open accounts at rival banks crashed their apps. The still-banked ran out of precaution: savers at healthy institutions queued to withdraw cash, and regulators and bankers denied that any other bank was at risk.
The state’s response is a scheduled conversion of deposits into cash. Law 7755/26, rushed through on 4 November, obliges the Deposit Guarantee Fund to pay each saver an advance of up to 40 times the monthly minimum wage — 121.76 million guaraníes, about $19,000 — within five working days, starting with a first tranche of up to 10 million guaraníes ($1,600). The full guarantee — 75 times the monthly minimum wage, 228.3 million guaraníes (roughly $37,000) — repays 97% of Ueno’s customers in full; guaranteed deposits total around $787 million. By 8 November, 1.2 million customers had been repaid around $160 million, said President Pedro Alliana, Peña’s successor.
The conversion is physical, not accounting. The fund held assets worth $1.63 billion at end-September, but only $19.4 million — 1.2% — at sight, and with 55% of the portfolio in foreign currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More, analysts estimate some $137 million must be converted for payouts in guaraníes. The pre-crisis baseline: cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknotes (as... More stood at 20.2 trillion guaraníes on 31 October, two days before the seizure, against a seasonal peak of 21.7 trillion at end-2025. The BCP’s November figure, due in December, will measure the run.
The foreign leg was equally dramatic: the dollarMonetary unit of the United States of America, and a number of other countries e.g. Australia, Canada and New Zealand. More rose close to 10% against the guaraní in four days, from 5,900 to 6,500 — the guaraní’s biggest weekly fall in 28 years. Economist Wildo González called it “domestic dollarisationProcess where the US dollar is de facto adopted as the currency of a country. More, by companies and by savers — a hedging reaction rather than speculation”. When confidence in private money evaporates, the public chooses between forms of money, not just between banks.
The irony is heavy: the new notes are due to enter circulation alongside current ones from early 2027. The launch, staged as a celebration of national identity, now doubles as a stress test: the central bank must rebuild credibility just as distrust of digital deposits peaks. Banknotes are not only an expression of confidence; they are what people reach for when it is gone.
Paraguay has been South America’s growth engine, yet Transparency International ranks it 150th of 182 — only Venezuela fares worse on the continent. Why: the president held a stake in Ueno’s holding company until March 2025; he appointed Carvallo, a former head of the Ueno group, to run the central bank that supervised it; the state pension fund parked $355 million there, beyond legal limits. “Under Peña, it began to lose credibility, lose neutrality and then relax all its control mechanisms,” said professor José Tomás Sánchez. Prosecutors have charged 27 people; Peña, in pretrial detention, denies wrongdoing.
Paraguay’s was a digital bank run, and only cash could end it. There was no vaultSafe; strong room. A place reinforced with special security measures where high-value objects and documents are safeguarded. In central banks, banknotes and other objects are safeguarded in vaults. More to mob, no teller to overwhelm: the money was balances, and when the app went dark the run moved to the only exits left — the state’s conversion of deposits into banknotes, counters at healthy banks, exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More desks selling dollars. Because depositors could turn balances into cash, a bank holding nearly 9% of system deposits failed without taking the paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More system with it: markets, buses and shops kept taking banknotes no dead app could replace.
The irony is complete. Ueno grew by paying people to go digital: cashback rewards pulled millions of Paraguayans into the banking system — and into a bank far less solid than its growth. When the model broke, it was physical cash, the very thing a digital bank makes optional, that kept daily life going and contained the damage. Cash demand is a barometer of trust; in Asunción this month, it was also the safety net.