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Lebanese using bitcoin to move money in and out of the country

February 25, 2020 at 2:56 pm

A digital rendition of a Bitcoin [David McBee / Pexels]

Lebanese people are increasingly using bitcoin, and other virtual currencies, to move money in and out of the country, amid the worst economic and financial crises since the end of the civil war in 1990.

Confidence in Lebanese banks has slumped since anti-government protests swept the country in October 2019, with banks introducing informal capital controls which limit weekly withdrawals.

Banks have also limited “international spending” to prevent the flight of capital from Lebanon, though according to Parliamentary Speaker Nabih Berri, owners of five large banks transferred $2.3 billion of “personal money” abroad between October 2019 and February 2020.

Vast international transfers and tightening banking restrictions have shaken faith in the Lebanese lira in past months. While the country effectively ran out of dollars in September, pushing the black-market exchange rate upwards.

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Exchange rates stabilised towards the end of February, with the rate remaining at 2,437 lira to the dollar, despite the currency originally being pegged at 1,507.5 lira to the dollar.

According to news outlet Actionable Insights, approximately 65 per cent of Lebanese money is in banks, leaving two thirds of the country cut off from personal funds.

Lebanese statistician Nassim Nicholas Taleb called this “the most potent case for cryptocurrencies”, adding that “banks are never there when you need them”.

Bitcoin is not issued nor controlled by a government or financial entity and transactions are made between people, anonymously and verified by a centralised global network of computers.

“Bitcoin is protected by mathematics, fiat [traditional] currencies are protected by governments. Which do you trust?”, Simon Tadros, a 33-year-old bitcoin trader from Beirut, told Al Jazeera.

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Lebanon has been slow to move towards the use of virtual currencies, as a result of the currency peg to the dollar, and the infamous volatility of bitcoin. However, with many Lebanese living abroad, economic difficulties in the country have forced people to become more creative.

“Right now, Lebanese are interested in escaping tight restrictions on cash withdrawals and transfers. They basically want financial freedom… if you want to go around the banking system bitcoin is a solution,” 29-year-old Mahmoud Dgheim told Al Jazeera.