Tether CEO Paolo Ardoino has responded to claims that the company's stablecoin, USDT, is being increasingly sought after in Paraguay following a significant banking crisis that cut off millions of people from their savings. Ardinoino has described this as "a flight to safety."

As noted in a recent X post by Bitcoin proponent Samson Mow, Tether's USDT has seen a significant rise in value relative to the Paraguayan guaraní amid the collapse of Ueno Bank, one of Paraguay's biggest digital lenders.

Ueno Bank, with an estimated 3 million customers (a significant percentage of adult Paraguayans), has been hit by a major financial crisis.

According to Mow, USDT has risen from 5,692 guaraníes to over 6,000 guaraníes, an increase of over 5%.

The surge in interest in the U.S. dollar-backed stablecoin USDT, Mow argues, is due to people trying to safeguard their savings outside of the traditional banking system.

USDT's exchange rate rose from about 5,692 guaraníes on Oct. 15 to over 6,000 on Nov. 4.

It is worth noting that even the traditional U.S. dollar rose against the guaraní over the same period.

Banking crisis in Paraguay leaves millions without access to funds

The rising interest in USDT comes as Paraguay faces a major financial crisis over the collapse of Ueno Bank.

On Nov. 3, Paraguay's central bank announced the start of resolution proceedings for the financial institution after discovering that Ueno Bank's solvency ratio had dropped below half the minimum limit.

The move essentially shut down Ueno Bank, cutting off millions of customers' access to their savings and standard banking services for the time being.

The crisis has also cast doubt on public funds parked at Ueno Bank, including hundreds of millions of dollars from Paraguay's social security system.

The scandal has reportedly already led to the arrest of eight people connected to the bank as well as the resignation of central bank president Carlos Carvallo, as reported by Reuters.

Paraguay's central bank has been trying to reassure depositors, stressing that the situation pertains specifically to Ueno Bank and is not indicative of the collapse of the country's banking system.

Customers with frozen funds at Ueno Bank cannot necessarily convert their deposits to stablecoins until they are able to access their money again.