Recently I was invited by the Hanseatic Blockchain Institute to give a talk, and I decided to discuss what is happening in Lebanon and why cryptocurrencies can actually make a difference there. For some context, I did a semester abroad and studied in Beirut during Spring 2014 at the University of Saint Joseph, while pursuing my bachelors in political science at the University of Geneva. It was one of the best semesters of my life, filled with sun, ancient ruins, and I made friends for life.
Come October 17th 2019 and my friends are in the streets, asking for change. The Lebanese government had decided to tax Whatsapp, among other outrageous policies. I had observed how resilient Lebanese people could be, but at that point, enough was enough. The Revolution/Thawra began, asking for the end of the confessionalist system, root of many of Lebanon’s issues.
The overall lack of accountability and corruption, had lead to dreadful public services with regular electricity and water shortages. The anger, and frustration was muted in early 2020, as the pandemic locked everyone up inside. The Revolution wasn’t over, the issues has not been resolved, no politician took action, people were silenced and asked to stay home. People were stuck, and their finances as well, unable to move their funds due to tighter capital control from the Banque du Liban as the Lebanese Pound had started to drop in value.
With horror, on August 4th 2020 the world witnessed another catastrophic all time low, for this government, which was incapable to protect its people from a 2,750 tonnes of ammonium nitrate blast which detonated in the port of Beirut. That “TNT” had been casually stored in a warehouse with no safety measures. Officials had known about this dangerous situation, and had failed to act upon it for 6 years. Their carelessness caused at least 207 deaths, 7’500 injuries and 15$ billion in property damage and left more than 300’000 people homeless. Politicians and port officials were incapable to explain this foolishness and left the Lebanese people to fend for themselves, self-organise and clear the rubbish from the streets with their own hands. This was the cherry on top, no one was asking for.
At this point, the Lebanese dollar had lost significant value, rendering the reparations extremely difficult, as construction materials are mostly imported and the lack of dollars, used for imports were being restricted by the local banks.
The Lebanese dollar had been pegged to the US dollar since the 60s and had reached a fixed exchange rate of 1507.5 LBP for 1$ in 1998 (which is the exchange rate I was able to enjoy in 2014). Today, people need 19’500 LBP for 1$.
The Central Bank of Lebanon/Banque du Liban has been incapable to maintain the official exchange rate. Currently, under Swiss and French investigations, it has allegedly been running the largest institutional Ponzi scheme. For decades, Lebanon was called the “Switzerland of the Middle East” acting as a financial refuge for its most questionable neighbors and offering high returns on investments while showing no actual growth.
Facing an unsustainable sovereign debt (280% debt/GDP ratio) and a high trade deficit, the Banque du Liban and local commercial banks, started freezing bank accounts and added more capital control. As a result, people have lost most of their purchasing power and life savings, unable to move their funds to avoid this financial catastrophe. The term “lollar” has since been coined by Dan Azzi, a Harvard economic fellow to describe US dollars stuck in the Lebanese banking system.
All these dreadful monetary policies made it all more difficult for people or organisations to receive funds to help them rebuild their devastated city. This blow was the last straw for many. For those who can afford it, immigration is the only way out of this political, social and financial mess. Leaving, since change is impossible from the inside. The brain drain has been going on for decades, ever since the Civil war (1975 – 1990), the Lebanese diaspora has reached more than 12 million, ever supporting the 4 million that stayed home.
The diaspora is the backbone of the Lebanese economy. It plays an important economic role for the country, as people living abroad send money back home, to support their friends and family. Local wages don’t echo the cost of living which are in turn influenced by this influx of capital which is not a product of the local economy. This imported wealth, creates a parallel economy and represents approximately 36.2% of the GDP or 7 billion annually. A significant sum you might say.
Cryptocurrencies can be used for international remittance, with low fees, no middle man, no bank they can support this economy and offer a little bit of relief.
So why use cryptocurrencies in Lebanon?
- Escape the monetary control imposed by the Banque du Liban and the local banks.
- Avoid expensive international remittance costs
- Gain access to Decentralised Finance (DeFi)
- Protect oneself from LBP devaluation, using stablecoins
- Benefit from using open, permissionless, decentralised, censorship resistant, immutable, transparent sound peer to peer electronic cash.
Lebanon is a failed state, as
- they’ve lost control over their territory, and have lost the monopoly on the legitimate use of physical force (Hezbollah),
- As they have failed to provide public services. At the moment of writing, most hospitals have shut down and there is no more fuel to be found. Extreme electricity shortages have left people in darkness.
- Finally, all the in-fighting and lack of government results in Lebanon being unable to interact with other states properly as a full member of the international community and lacks legitimate authority to make collective decisions.
Support Lebanon now
- For ongoing socio-economic conversations about Lebanon, check out The Democratic Economy, last theme revolved around democratic currencies, innovation & technology. An event powered by Daleel Tadamon.
- Medsforleb connects people on Instagram that can offer/need certain medications.
- Akkar disaster Relief Fundraiser the latest explosion killing more than 50 people, while hospitals can’t treat people due to lack of fuel.
“Tonight Lebanon has officially run out of fuel everywhere, hospitals, universities, streets, home, bakeries, pharmacies. The international community is still silent about the criminals who have left 4 million people starving in the dark” Aug 15th 2021
I leave you with Blu Fiefer if you need to shake it off
PS: all funds donated to this BCH address will be sent to friends in Lebanon in need. Thank you for all your support.