Crypto gives hope to bankrupt Lebanon

Lebanon’s poverty rate has exceeded 80 percent to the extent that some of the refugees from neighboring civil war-torn Syria are nonetheless returning to their country.
After being pilloried since 2013, and even though the Bank of Lebanon has banned its transactions, thanks to this crisis Bitcoin has gradually made its way into the hearts of Lebanese people. After the first one in Hamra Street, Beirut, in August 2021, as of today there are already 6 ATMs in the territory for buying or selling cryptocurrencies, and we guarantee that none of them have been damaged yet.
But what caused the massive deterioration of one of the Middle East’s most prosperous economies?

Divergence Day

The Lebanese pound has always had a fondness for the peg since the last century and has gone from the Franc in the early 1920s to the British pound, then back to the Franc again, and finally to the dollar in 1997 with an exchange rate set at 1,500 Lebanese pounds.
But one of the main characteristics of a pegged currency is that it will lose it if there is no proper tokenomics behind it: how do you peg to any other coin a currency that has lost 500 times its value in 30 years without taking any countermeasures?
And to think that for 20 years things, all in all, went well: tourism, real estate market, remittances, high-interest rates, and anonymity for bank accounts.
Then, in 2015, due to a drop in the cost of oil and inflows of money from abroad, government debt gradually began to rise.
As early as 2018, some banks began to impose additional fees for dollar cash withdrawals.
Despite (or thanks to) various financial engineering operations, geared toward living day to day, rather than a structural attempt to resolve the situation, on August 1, 2019, the dollar exchange rate on the black market, began to diverge.
Various popular tax initiatives on gas, tobacco, and VoIP calls then triggered in the same year what has been called the October 17 revolution.

Point of no return

Amid an already severe economic picture plagued by the April 2020 default and Covid-19, on August 4 of that year, 700 tons of ammonium nitrate confiscated and stored for 8 years in the port of Beirut exploded following a fire at a nearby fireworks depot.
The blast caused more than 200 deaths, a 125-meter-deep crater, and $15 billion in damage, representing 20 percent of GDP.
From this drubbing, the Lebanese economy never recovered, to the point that imports have since reached prohibitive costs, suffice to mention a 10-fold increase in the cost of rice.
The crisis has reached such proportions that vital medicines are in short supply and most bakeries are closing due to the excessive cost of grain.
The Lebanese pound is de facto now divided in two: on one side are “Lollars,” deposited before October 2019 and depreciated by 95 percent, while on the other side we have Fresh Dollars, deposited by foreign countries from October 2019 onward and pegged (for now) to the dollar.

When you get into a bank to rob yourself

In such a situation, things can get out of hand: this is the case with Sali Hafez, who showed up with a toy gun at a branch of her bank to withdraw her $13,000.
Her 23-year-old sister was sick with cancer and needed expensive medical treatment, while the bank was only willing to let her withdraw $200 a month in Lebanese pounds.
A trial of course ensued, but she got off with a small fine and the revocation of her passport for 6 months. Throughout the country she is considered a heroine, and by now events like this are commonplace, such as 42-year-old Bassam al-Sheikh Hussein, who showed up to withdraw his $200,000 with a sawed-off shotgun and still managed to withdraw $35,000.
All in all a good result, given the current times.

Crypto Smugglers

So, to recap:

• the Lebanese pound went from a Dollar exchange rate of 1500 to 40000 within three years

• the dollar equivalent of a minimum wage is 33

• it is not possible to withdraw more than 200 Lebanese pounds per month

• banks are closing when it suits them

• credit cards do not work abroad

• to treat friends to dinner, is recommended a fanny pack full of cash

In a scenario like this, is emerging the figure of the crypto-smuggler, who, thanks to the triangulation between stablecoins, cash, and foreign remittances, can circumvent a broken banking system. In detail, this figure gives up USDT (a cryptocurrency really pegged to the dollar) in exchange for cash for a small commission of less than 5 percent and then re-supplies USDT abroad, in countries like Nigeria, where the presence of Lebanese emigrants is considerable.

Good thinking

Lebanon, despite being a country plagued by constant electricity blackouts, is nonetheless home to several hydroelectric power plants: the ideal place for cryptomining farms …if they were not so often visited by the police, and shut down under the most disparate pretexts. We want to do some good thinking, and so we will say that just by chance some are shut down and some are not, but it is hard to have confidence in a justice system that jailed only 25 people (mostly mere laborers) following the 2020 blast.

With Ethereum moved to POS, certainly mining has become less profitable and many, to avoid making a mistake, could bet directly on Bitcoin: in any case, buying the necessary hardware in cryptocurrency can save further money. In the absence of hydroelectric sources, there are still those who use photovoltaics, albeit for half the day, or directly fuel.

Remote work

With an average salary equivalent to $50, many Lebanese who can speak other languages, have become freelancers and are paid directly in cryptocurrency for jobs such as video editing, coding, call center and specialized support.

Many of them, after earning in a few hours what they had been earning in a month, quit their previous jobs, and they are also able to support their family members, particularly older ones who probably lack the mental aptitude to switch to this new form of work.

Peg this!

Thanks to this wave of the fresh crypto economy, the volume of cryptocurrency transactions in Lebanon is doubling year on year as of just 2019. By now the trendiest clubs and stores in Beirut are accepting virtual currencies, even though it is officially forbidden to use blockchain-based currencies in commercial establishments, but for the time being, the government has bigger problems to solve.
Could it be that Satoshi Nakamoto’s dream is finally coming true? Or is this mighty adoption of cryptocurrencies just the third-millennium alternative to barter?
By all means, the inaction of the corrupt Lebanese government has created a vacuum that somehow needed to be filled. The fluctuations of Bitcoin certainly cannot be frightening compared to a continuous depreciation of the local currency, and there is a legitimate lack of trust among people in the inert institutions and the central bank.
In a hyper-connected economic system, a peg between FIATs is unfair and foolish…so it is necessary to try to get around it in any way possible, but even fairer that those who benefit from it are not only the smartest.
One-third of Lebanese speak English: I hope some of them will read this article and may convey a message of hope.