Some of Lebanon’s young tech savvy have reportedly shifted their focus to cryptocurrencies amid the current currency slump.
Earlier this week, the government closed all local banks due to ongoing risks to employees and customers. It is still unknown when financial institutions will reopen, which could be one of the reasons why locals started looking for alternative financial instruments, including digital assets.
Crypto to the rescue
The economic situation in Lebanon worsened after the government closed all domestic banking institutions until further notice. So people who want to withdraw their funds can do so at a considerable loss or take out checks denominated in US dollars, which are then sold for a fraction of their valuation, currently about 20%.
On the other hand, those who want to do something with their savings must act quickly because the Lebanese pound is depreciating daily.
According to a recent report by Reuters, some locals (mostly young people with enough knowledge about technological innovations) have started dealing with cryptocurrencies due to this setback.
Mario Awad, a Lebanese HODLer, told the media that many politicians, security officials, TV personalities and celebrities have also bought bitcoins or altcoins lately.
Another individual, who introduced himself as Ahmad, argued that cryptocurrencies are “100 times more real than the dollars” that Lebanese people keep in banks.
According to coverage, the digital asset of choice for local investors is the world’s largest stablecoin: Tether (USDT). Its value is pegged to the US dollar and, in theory, should not be affected by the notorious volatility of the crypto market.
The Lebanese government has not yet brought the digital assets sector under its supervision. However, the lack of regulations does not seem to be a problem for domestic investors, most of whom do not trust the actions of the governing body.
“For many, this is considered a good thing because we are not living in a country where regulations and politicians give us hope, rather the opposite. But it hurts widespread (cryptocurrency) adoption,” opined one of the traders.
It is worth noting that crypto mining is also thriving in Lebanon, mainly due to cheap electricity prices. The local miner, who revealed himself to be Jad, spoke on the matter:
“Even if you make $10 a day with a normal computer, that’s now several times the minimum wage. After what we’ve been through, I’ll never put a penny back into a Lebanese bank.”
The crisis in Lebanon
For the past couple of decades, Lebanon has been struggling with a deep economic crisis. Although the country was one of the most developed states in the Arab region until 1975, a civil war that lasted until 1990 changed this trend.
The military conflict caused massive loss of human life and property and devastated the country’s financial system. Parts of Lebanon were left in ruins, while the main political parties continued to divide society years after the end of the war.
Violent events were not absent after 1990, when the nation’s forces clashed several times with the Israeli army, while in 2005, Prime Minister Rafic Hariri was killed in a car explosion bomb Political figures accused Syria of the murder, so another conflict began.
Despite not being as heavily involved in war efforts in recent years, civil demonstrations and terrorist bomb attacks are not absent in Lebanon.
It goes without saying that the turmoil in the country has caused a great wave of migration over the years. Currently, up to 14 million Lebanese live outside their homeland (twice the population of Lebanon itself).
Apart from seeking a peaceful environment for themselves and their families, these people also escaped from a country where the financial network barely works. The current inflation rate in Lebanon is over 160%, while the recently closed banks only intensified the problem.
The increased interest in cryptocurrencies shown by locals due to the current situation is nothing new. Residents of other countries, including Argentina and Turkey, have also jumped on the bandwagon due to worrying inflation rates or political upheaval.
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