“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 [d]lollars we have in the bank,” a Lebanese crypto enthusiast.
Things aren’t pretty in Lebanon right now. Due to the economic crisis in the country, all banks in Lebanon closed indefinitely on September 22.
The absence of traditional financial institutions has led young people to turn to crypto.
Backstory: Since 2019, the western Asian country has been battling a financial crisis, which worsened with the pandemic and the Beirut explosion in 2020. The IMF estimates the losses in Lebanon’s financial system at about $83 billion. Per Reuters, the Lebanese pound fell to $15,000 on the parallel market by September 2021 from around $1,500, which was the rate at the beginning of the year. It has lost over 90% of its value.
Why? Let’s just say the Lebanese government didn’t handle things well. A recent World Bank report explained that “excessive debt accumulation was used to give the illusion of stability and reinforce confidence in the macro-financial system for deposits to continue to flow in.”
In simple terms, the Lebanese government borrowed a lot of money to give off the illusion that all was well for people to keep using its currencies, especially people saving with it.
The way forward: While there are ongoing conversations on how to salvage the situation, Lebanese tech-savvy youth, politicians, security guards and many others are increasingly turning to cryptocurrency to shield themselves from currency depreciation, get money in and out of the country, and try to make up for the losses they have suffered. Millions of dollars in crypto are changing hands every day.
People are also mining crypto for income. Lebanon has some of the cheapest electricity in the world so people are using diesel generators to mine.
Despite all the bad rap that crypto gets, it’s in cases like this that its utility is proven. Cryptocurrencies might be volatile and unregulated but they’re a better alternative to a banking system that no one trusts to store their money in.
