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Lebanese Turn to Crypto Amid Country’s Financial Collapse: Report

Some of Lebanon’s tech-savvy youth have reportedly shifted their focus to cryptocurrencies amid the current currency crash

Earlier this week the government closed all local banks due to ongoing risks to employees and customers. It remains unknown when financial institutions will reopen, which could be a reason why locals started looking for alternative financial instruments, including digital assets.

Crypto to the rescue

The economic situation in Lebanon deteriorated after the government closed all domestic banking institutions until further notice. So people who want to withdraw their money can do so at significant losses, or take out US dollar-denominated checks, which are then sold for a fraction of their value – currently around 20%.

On the other hand, those looking to do something with their savings must act quickly as the Lebanese pound is depreciating every day.

According to a recent Reuters report, some locals (mainly young people with enough knowledge about technological innovations) started looking into cryptocurrencies as a result of this setback.

Mario Awad – a Lebanese HODLer – told the media that many politicians, security officials, TV personalities and celebrities have also been buying Bitcoin or altcoins lately.

Another person, who introduced himself as Ahmad, argued that cryptocurrencies are “100 times more real than the dollars” Lebanese keep in banks.

According to the coverage, the most popular digital asset of local investors is the largest stablecoin in the world – Tether (USDT). Its value is pegged to the American dollar and should theoretically remain unaffected by the notorious volatility in the crypto market.

The Lebanese government has not yet put the digital asset sector under its oversight. However, the lack of regulation does not appear to be a problem for domestic investors, most of whom do not trust the ruling authority.

“Many think that’s a good thing, because we don’t live in a country where regulations and politicians give us hope – quite the opposite. But it hurts widespread adoption (of cryptocurrency),” opined one of the traders.

It is worth noting that crypto mining is also thriving in Lebanon largely due to cheap electricity prices. On this subject, the local miner, posing as Jad, spoke:

“Even if you’re making $10 a day using a regular computer, that’s now multiples of minimum wage. After everything we’ve been through, I’ll never put a penny in a Lebanese bank again.”

The Crisis in Lebanon

Lebanon has been struggling with a deep economic crisis for several decades. Until 1975 the country was one of the most developed states in the Arab world, but a civil war that lasted until 1990 changed this development.

The military conflict caused massive loss of life and property and devastated the country’s financial system. Parts of Lebanon lay in ruins while the leading political parties continued to divide society years after the war ended.

There were also violent events after 1990, when the country’s armed forces repeatedly clashed with the Israeli army, while in 2005 Prime Minister Rafic Hariri was assassinated in a car bomb blast. Politicians accused Syria of the assassination, so another conflict began.

Although participation in the war effort has not been as strong in recent years, Lebanon has not been short of civil demonstrations and terrorist bombings.

Needless to say, the turmoil in the country over the years has caused a huge wave of migration. Currently, up to 14 million Lebanese live outside their homeland (twice the population of Lebanon itself).

Aside from finding a peaceful environment for themselves and their families, these individuals have also fled a country where the financial network is barely functioning. Lebanon’s current inflation rate is over 160%, while the recently closed banks have only exacerbated the problem.

The increased interest of locals in cryptocurrencies due to the ongoing situation is nothing new. Residents of other countries, including Argentina and Turkey, have also jumped on the bandwagon due to worrying inflation rates or political turmoil.

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