Lebanon is currently experiencing the worst ever financial crisis in decades. Lebanon’s banking system (as reported by Aljazeera) is forcing account holders to withdraw their savings in Lebanese pounds on the official market; by imposing strict capital controls. Unfortunately, the country’s official exchange rates have dropped by a whopping 40% lower compared to the parallel market.
Foreign currency movements in the country are very minimal due to the increased number of barriers. As a result, confidence levels in Lebanon’s banks are at an all-time low among citizens. More Lebanese are now seeking help from decentralized currencies such as Bitcoin (BTC) to move their money in and out of the country.
Bitcoin is the world’s first use case of blockchain technology and also the most popular cryptocurrency. Bitcoin is not issued, nor controlled by any central authority including the government, or any financial entity. One does not require the services of a bank or a middleman to carry out a transaction. Instead, transactions made through the Bitcoin network are peer-to-peer, incognito, and authorized by a centralized global network of computers.
The adoption of Bitcoin in Lebanon was slow
Since the cryptocurrency launched about a decade ago, it has gained a lot of traction across the world. Most people use Bitcoin to almost buy everything from a cup of coffee to booking flights. Unfortunately, for Lebanon, this has not been the case. Bitcoin did not take off in the country as banks imposed restrictions on buying Bitcoin using Lebanese credit cards.
In addition, poor internet speed and low electricity supply in Lebanon have also contributed to the country’s slow adoption of crypto. Another good reason Lebanon avoided Bitcoin is to avoid the risks involved. Well, bitcoin is known to be highly volatile, while the Lebanese pound has been pegged to the dollar for quite a long time, both of which have been used accordingly. Unfortunately, confidence in the Lebanese pound has been very low in recent times.
According to Aljazeera, the withdrawal limit of foreign currencies is $50 in a month and $50,000 annually. The rising tension in the country over a failing banking system and a hugely indebted government which might collapse the country’s economy; have led to people to shift from saving in banks to investing in assets. The Lebanese have purchased cars, real estate, jewelry, gold and in abundance, Bitcoin.
Bitcoin Yet Again a Safe Haven
Indeed, the financial crisis clouding Lebanon is a proof yet again, that Bitcoin is a safe haven during times of global uncertainty. Early into the year when tensions were boiling between the United States and Iran; Tron Weekly reported on how Bitcoin presents itself as a safe haven at times of conflicts. In addition, Bitcoin has offered an alternative payment option to the mainstream financial system; to South American countries like Venezuela and also Argentina.
Indeed, Lebanon’s financial crisis is yet another proof that Bitcoin is a safe haven in times of global uncertainty. Early in the year of tension between the United States and Iran; Tron Weekly reported how Bitcoin presents itself as a safe haven in times of conflict. In addition, Bitcoin has offered an alternative payment option to the mainstream financial system; to South American countries such as Venezuela and also to Argentina.
Despite trading, Bitcoin has presented the wealthy investors in the country a channel to transfer capital overseas. Lebanese investors are preferring LocalBitcoins to channel their capital abroad, rather than suffer the 40 percent liability at the local foreign exchange.
In conclusion, the tense financial atmosphere in Lebanon is seeing cross-border remittance take up to ten days to complete. Meanwhile, international Bitcoin transfers take significantly less time of up to minutes, to complete a remittance. This alarming level of distrust has significantly accelerated the rate of crypto adoption in Lebanon, as Bitcoin continues to build its reputation as a safe haven asset.