In Lebanon, bitcoin is proving to be a safe bet

It is a small, unpretentious office hidden between a dog salon and a slot machine room in Bourj Hamoud, Beirut’s Armenian Quarter. There are two golf clubs on the wall, three golf balls, and a poster framed above them, showing the price of bitcoin, which is rising sharply.

It is here that 37-year-old Samir Saad is preparing to open the first Lebanese consulting company specializing in the most famous digital menu: bitcoin.

Saad, a trained mechanical engineer, has been interested in cryptocurrencies through friends of developers since 2014.

“The Lebanese people have been robbed of their money. I want to teach them how to become their own bank.

– Samir Saad, bitcoin specialist

“The goal is to educate people about cryptocurrencies for free, to explain to them how to create a secure portfolio, as well as the basics of blockchain. [a ledger that compiles each transaction made by its users]Said the Middle East Eye.

“They were robbed of money. I want to teach them how to become their own bank.”

Several weeks before the grand opening of the consulting company, several dozen people have already agreed, Saad said.

“A local man came this morning and wanted to exchange $ 7,500 for bitcoins, but I don’t make currencies, I just advise. In any case, it shows that interest is developing,” he added.

The “revolution” of the digital currency

Worldwide by page Coinmarketcap since mid-May 2021, the bitcoin market has grown to more than $ 2,500 billion.

This dynamic has been triggered american stimulus package and the growing interest of investment funds, banks and large companies in bitcoins. Recently, digital payment giant PayPal announced that it will launch a cryptocurrency buying and selling service on its platform.

Is the wave of cryptocurrencies going to overtake Lebanon? Many characters point to a clear yes.

Charles, a 34-year-old sound engineer, is already familiar with roller coaster riding, which is an integral part of this highly volatile market. He bought one bitcoin for nearly $ 30,000 in January; by April, the price had reached $ 65,000 and dropped back to $ 30,000 just two months later.

“I did a lot of research before I invested,” he told MEE. “These types of fluctuations are common in this market, so I’m not afraid. I don’t plan to sell for years because I trust this technology.”

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Charles’ interest in cryptocurrencies began in 2015, but for many years he observed only marginally. In the end, it took a Lebanese merchant to persuade him to invest in early 2021.

“I saved money to buy a house in Europe last year, but the business broke down. I ended up with a lot of money in dollars, so I decided to invest them all in cryptocurrency. It’s a risky bet, but know what I’m doing.” he said.

While statistics are difficult to obtain in Lebanon, the global excitement surrounding bitcoins seems to be dragging on a bit.

Since January 2020, Blue Wallet, which allows people to safely store cryptocurrencies on blockchain, has reported a 1,781 percent increase in registered portfolios in Lebanon, the world’s largest.

According to Reuters, which interviewed six bitcoin traders in September last year, several million dollars are reportedly exchanged for bitcoin every day in Lebanon.

Marcel Yacoub, a digital currency enthusiast since 2017, also feels evolution.

“Marketed volumes have increased significantly recently. It is estimated that monthly bitcoin transactions currently reach $ 10 million. This is ‘nothing’ for a country like Lebanon,” he told MEE.

In 2019, he set up a discussion group on the encrypted Telegram messaging application called “Lebanon Bitcoin”, which offers analytical and educational resources. The group, which had only a few hundred subscribers last year, now hosts a community of 2,300 people.

“There was a sharp rise in 2020 as bitcoin exceeded its all-time high. Unfortunately, the madness was driven mainly by a desire for speculation in the short term,” Yacoub said.

“There are many people in Lebanon who have lost money because of the crisis. Some see cryptocurrencies as a way to limit losses and recover quickly, but it’s dangerous. These people are easily exposed to the dark patterns that appear everywhere in the cryptosphere. It will still be time until we achieve widespread and healthy adoption. ”

An alternative solution to the crisis?

The recent madness is running parallel to the unprecedented economic crisis that Lebanon is going through.

In the summer of 2019, the Ponzi scheme, on which the country’s economy was founded since the 1990s, failed. The so-called “financial engineering” implemented by the Bank of Lebanon (BDL), aimed at maintaining artificial parity between the Lebanese pound and the dollar, is attracting more and more bank deposits. In return, the banks offered huge interest rates – up to 15 percent.

Since then, the country has been on a downward spiral. Lebanese citizens no longer have access to their money stuck in banks. On the black market, dollars are currently trading at around 20,000 Lebanese pounds.

‘Despite their high volatility, cryptocurrencies are a safer investment than the Lebanese pound … Sure, bitcoin may lose 30 percent of its value, but the pound, on the other hand, has lost 100 percent.

– Patrick Mardini, Professor of Finance

The World Bank wrote in a recent report that the country’s economic and financial crisis is one of three the most severe crises since the mid-19th century and notes that “such a sharp and rapid contraction is usually associated with conflict or war.”

The national currency has lost more than 90 percent of its value against the dollar, while consumer price inflation – a standard basket of food and beverages – rose by 290 percent year on year in August, according to Bloomberg. According to one UN report, three-quarters of the country’s population now lives below the poverty line.

Interest in bitcoins is evident as the cryptocurrency itself emerged as a result of the global economic crisis in 2008: it allows money to be sent and received by decentralized means, bypassing intermediaries from traditionally credible third parties such as banks or governments. .

Unlike fiat currencies, which are pushed by central banks to lead to inflation, bitcoin is limited to 21 million units. Every user has a secure “digital wallet”, an encrypted key that only he knows.

This trend is flourishing in countries experiencing major economic crises, such as Argentina and Venezuela. In several countries on the African continent, bitcoin is used as a stabilizer of value in inflation and as a way to circumvent bank constraints.

For the first time this year, the country has gone so far as to grant bitcoin legal tender status: in El Salvador, bitcoin can be used for any transaction, just like the dollar.

“Despite high volatility, cryptocurrencies are a safer investment than the Lebanese pound,” Patrick Mardini, a professor of finance at the Lebanese University in Balamanda and director of the Lebanon Institute for Market Studies think tank, told MEE.

“Yes, bitcoin may lose 30 percent of its value, but the pound has lost 100 percent,” he said.

“Unless there is a sound monetary policy and the public deficit and depositor withdrawals are funded by central bank money, the currency will continue to depreciate against the dollar and Lebanese people will continue to turn away from it.”

“Avoid the banks”

Unlike the US and Europe, Lebanon was barely hit by the financial crisis in 2008 and therefore did not pay much attention to the emerging trend of cryptocurrencies. But that has all changed now.

“The rest of the world became interested in bitcoins in 2010 because the monetary system was questioned,” said Lara Abdul Malak, editor-in-chief of Unlock magazine, which specializes in blockchain coverage in the Middle East. he said.

“In the current situation, Lebanese are starting to look for alternatives.”

With a total of $ 6.3 billion transferred in 2020, remittances from the Lebanese diaspora to their home country represent a significant part of GDP. The country ranks third in the world with a remittance to GDP ratio of 32.9 percent.

Given the current situation, it is highly likely that the diaspora will continue to seek alternatives to banks in order to transfer funds to Lebanon. This is especially true because a significant part of the population does not have a bank account.

“Bitcoin offers what the central bank can’t do: security and ownership”

– Lara Abdul Malak, Editor-in-Chief of Unlock Magazine

“The only thing that holds the economic system together is the trust we place in its intermediaries. In Lebanon, this trust is undermined and I do not think it will be possible to go back,” Abdul Malak said.

“During the Civil War [1975-1990], the Lebanese pound has lost much of its value. Since then, savers have turned to the dollar and promised not to make the same mistake again. Today, it is their dollars, their lifetime savings that have been stolen. Bitcoin offers what the central bank can’t do: security and ownership, “she explained.

However, the Lebanese legal framework is extremely restrictive. Since 2013, the central bank has banned the purchase of cryptocurrencies using local payment cards on trading platforms.

Cryptomenal transactions are therefore organized peer-to-peer through WhatsApp or Telegram groups, exposing you to the risk of potential fraud and high commissions.

“The lack of public awareness of the use of bitcoins is supported by a more favorable regulatory framework than in the United States or Europe. This is a clear obstacle to widespread adoption,” Mardini said.

“At the same time, the central bank, which considers bitcoin to be particularly harmful, is itself under fire for its catastrophic crisis management. You don’t have to wonder if it still has any credibility left,” he added.

Malak believes that although the BDL may ban bitcoins, it will not be able to prevent people from using cryptocurrencies.

“Lebanese want to avoid the banks because they have no control over what is happening in them.”