Lebanese people are turning to cryptocurrency as their fiat currency continues to lose its value drastically. The Lebanese pound, or lira, has lost more than 90% of its worth in a matter of two years. At the same time, inflation is skyrocketing, with food prices increasing by up to 400% as of December 2020 while clothing prices have risen 560% and furnishing, household equipment, and maintenance soaring by 655%. “(Security) officers, politicians, media personalities, everyone is buying crypto,” a Lebanese cryptocurrency trader Mario Awad told Reuters.
“Increasingly, it’s also your average person who is trying to get out of the collapsed banks and cut their losses.”
The cryptocurrency market is fueled by the collapse of Lebanon’s financial system in 2019. The Lebanese pound has been pegged to the US dollar for more than two decades, and by September this year, it slid from 1,500 to the USD to roughly 15,000 on the parallel market. Citizens are forced to withdraw money in local currency at a passive loss. Even if they take out US dollar-denominated cheques that are sold for a fraction, currently about 20%, of their price. Last year, the government proposed a recovery plan to the International Monetary Fund (IMF) that estimated the losses in its financial system at about $83 billion. “It’s funny when people say crypto isn’t real because what we found out in Lebanon is that this digital currency is 100 times more real than the lollars (slang term for USD stuck in Lebanon’s financial system) we have in the bank,” said a crypto enthusiast. In Lebanon, the popular mode of transaction is peer-to-peer (P2P) on popular apps like WhatsApp and Telegram. The majority of these transactions ranging between a few hundred and a few thousand dollars’ are happening in stablecoins like Tether (USDT). According to a World Bank report, the country’s economic crisis is likely among the world’s worst since the 1850s due to systemic corruption. “The developers of bitcoin were definitely thinking about the exact things that happened here … about corrupt institutions with bad monetary and fiscal policies leading to the debasement of currencies,” said a cryptocurrency user. Lebanese, however, are not just trading crypto but also mining them in a country that suffers power cuts. Crypto miners, however, can take advantage of heavy fuel subsidies that make electricity available in the region at some of the cheapest rates in the world. However, regulation is still a grey area, with a Lebanese executive at a crypto exchange called CryptoLira saying, “It’s a regulatory desert.” “For many, that’s seen as good because we’re not living in a country where regulations and politicians give us hope – quite the opposite. But it does harm widespread adoption (of cryptocurrency),” he said.