Economic Situation In Lebanon
Source: Envato
Lebanon has been going through one of the worst economic crises seen anywhere in the world since the 1850s. Starting in 2019, the country's economy began falling apart, and several things made it even worse - including COVID-19 and a massive explosion at Beirut's port in 2020.
The problems have been severe: The Lebanese currency lost almost all of its value (98%) since 2019. Prices shot up dramatically, with inflation reaching triple digits - meaning things that used to cost $1 might suddenly cost $3 or more.
Almost 80% of people fell into poverty, and nearly one-third of the population became unemployed. Basic services like electricity became unreliable, with power only available for 1-2 hours per day.
The banking system essentially broke down. People couldn't freely access their money in banks, and when they tried to send money internationally, they would lose about half of it in fees.
GDP per capita dropped by 36.5% between 2019 and 2021, and Lebanon was reclassified by the World Bank as a lower-middle-income country, down from upper-middle-income status in July 2022.
This is where cryptocurrency became important for many Lebanese people. Even though the central bank does not officially allow it, many people turned to crypto to protect their money from losing value and to make payments when the banking system wasn't working well.
It became pretty easy to buy cryptocurrencies like Bitcoin or USD Tether in Beirut, either through mobile apps or from traders who would exchange cash for crypto.
The interest in cryptocurrency grew dramatically - in early 2020, the number of crypto wallets in Lebanon increased by over 1,700%, the highest increase anywhere in the world. By 2023, Lebanese people were searching for information about crypto online more than any other country.
While crypto hasn't solved all of Lebanon's economic problems, it has helped many people by giving them a way to store their money safely and make payments when the traditional banking system wasn't working well.
The State of Crypto Adoption in Lebanon
When the banks failed and people couldn't access their money, many Lebanese people turned to cryptocurrencies like Bitcoin as a solution.
In 2024, about 4.74% of Lebanese people are using crypto, and this number is expected to grow to 4.87% by 2025. While this might seem small, it represents around 248,400 users.
The average revenue per user in the cryptocurrency market in Lebanon amounts to US$11.7 billion in 2024.
Lebanese people are using crypto in several practical ways. Some use it to protect their savings from the country's high inflation. Others exchange crypto for US dollars to buy basic needs like groceries. Many people have even started mining crypto or doing online freelance work paid in cryptocurrency to earn a living.
The banking crisis has been so bad that people have protested and even destroyed ATMs across the country.
Interestingly, even though the Central Bank governor, Riad Salameh, warned against using cryptocurrencies and called them dangerous, this seems to have had the opposite effect. Given the bank's failure to protect people's savings, many Lebanese saw this warning as a reason to trust crypto more.
Salameh went on to state that “the price is very dangerous and can only be a bubble, and we want to protect the savings of the Lebanese people”.
Despite all the challenges in moving money in and out of Lebanon, experts believe millions of dollars worth of crypto transactions happen there every month.
Lebanon is following a pattern seen in other countries with similar problems – when the traditional banking system fails people, they turn to cryptocurrencies as an alternative way to manage their money.
Crypto Law In Lebanon
Lebanon has taken a pretty strict stance against cryptocurrencies since 2013.
The country's central bank, Banque du Liban (BDL), first warned banks and financial institutions about the risks of using cryptocurrencies, especially Bitcoin. They were mainly worried because no laws or regulations controlled these digital currencies.
In 2017, things got interesting when Riad Salameh, who runs the central bank, said they wanted to create a digital currency that would be controlled by the government. However, he didn't give any specific details about how or when this would happen.
The situation became even clearer in 2018 when Lebanon's Capital Markets Authority (CMA) made some strict rules. They completely banned financial institutions from doing anything with cryptocurrencies - they couldn't create them, market them, or trade them.
The CMA listed several reasons for this ban:
- There were no laws controlling cryptocurrency platforms,
- No guarantees people could get their money back, and no central bank backing (which meant prices could swing wildly)
- Concerns about criminals using crypto for illegal activities like money laundering or funding terrorism.
- Mistakes in crypto transactions couldn't be fixed or reversed.
In simple terms, Lebanon has taken a very cautious and protective approach, essentially saying "no" to private cryptocurrencies while considering the possibility of creating their government-controlled digital currency.
Challenges to Crypto Adoption in Lebanon
Source: Envato
Crypto adoption in Lebanon faces several challenges:
- Regulatory Uncertainty: The Lebanese Central Bank has a restrictive stance on cryptocurrencies, emphasizing risks like volatility and potential illicit use. This creates uncertainty for users and businesses.
- Economic Instability: Lebanon's ongoing economic crisis, marked by hyperinflation and currency devaluation, complicates the adoption of stable financial alternatives like cryptocurrencies.
- Lack of Legal Framework: The absence of a comprehensive regulatory framework leaves gaps in consumer protection, taxation, and legal recognition of cryptocurrency transactions.
- Technological Barriers: Limited technological infrastructure and digital literacy can hinder widespread adoption.
- Public Trust: Distrust in traditional banking systems drives some towards cryptocurrencies, but overall public awareness and trust in digital currencies remain low.
Potential Benefits of Crypto Adoption in Lebanon
Crypto adoption in Lebanon presents several potential benefits, especially given the country's current economic challenges:
- Financial Inclusion: Cryptocurrencies can provide access to financial services for those who are unbanked or underbanked, offering a lifeline in a country with an unstable banking system.
- Hedge Against Inflation: In an environment of hyperinflation, cryptocurrencies, particularly stablecoins, can serve as a store of value, protecting savings from devaluation.
- Remittances: Cryptocurrencies offer a faster and cheaper alternative for sending and receiving remittances, which is crucial for many Lebanese families reliant on money from abroad.
- Economic Empowerment: By embracing decentralized finance (DeFi) and blockchain technology, individuals can gain greater control over their finances, fostering economic independence.
- Innovation and Entrepreneurship: The crypto sector can stimulate innovation, leading to the development of new businesses, job creation, and technological advancements.
Conclusion
With the Lebanese banking system in shambles and the local currency plummeting in value, cryptocurrencies have provided a way for Lebanese citizens to protect their savings, make payments, and even earn a living.
While the government has taken a cautious approach to regulating crypto, the practical need for alternative financial solutions has driven growing crypto adoption in Lebanon.
As the crisis continues, cryptocurrency could play an increasingly crucial role in helping the Lebanese people weather the economic storm.
