How Lebanon’s Economic Crisis Highlights Bitcoin’s Limitations
Lebanon is far from a poster child for cryptocurrency adoption.
News of Lebanese banks shuttering to prevent a bank run was met with predictable enthusiasm from the global bitcoin commentariat. People in Lebanon can no longer send foreign currencies, mainly dollars and euros, abroad. Further, due to heavily restricted banking access and limited liquidity provided by established grassroots networks, most Lebanese civilians also struggle to acquire bitcoin.
Long-time bitcoiner Ali Askar, currently on the ground in Lebanon, told CoinDesk a few Telegram and WhatsApp groups for local traders have nearly doubled in size over the past year, with one such private group reaching roughly 300 members this past weekend. Following news of the banking limitations, the Beirut-based car dealership Rkein Motors promptly started accepting bitcoin payments this week. Clearly, awareness is spreading.
However, a stark disconnect between daily bitcoin users and the rest of the populace continues in a region plagued by economic and political conflict.
“Bitcoin will not help the people. It will help the politicians because they are the filthy rich ones who have access to money,” one anonymous bitcoin trader with family in Lebanon told CoinDesk. He uses a European bank account to buy bitcoin, then sends it to people on the ground in Lebanon.
“It [bitcoin] could help them, perhaps, if they were sitting at home with 24 hours worth of electricity and internet, and they could work online to get paid for their online work. That’s a utopian scenario,” he added. “In Lebanon, the internet is very expensive. Electricity doesn’t come often. We sometimes have electricity for just six hours a day.”
Another problem is access. Most bitcoin exchanges don’t serve Lebanese users. Plus, sources with knowledge of the situation say sanctions recently imposed against a Lebanese bank allegedly connected to the paramilitary group Hezbollah have made crypto companies wary about accepting transfers from any Lebanese banks.
As such, sources say bitcoin buyers are mindful to only list “digital goods,” not cryptocurrency, in any paperwork or digital messages related to buying bitcoin from Lebanon.
“It’s similar to Iran,” the anonymous trader said, adding:
“People and communities suffer [from sanctions] while the elite find alternatives and business continues as usual.”
To make matters worse for prospective bitcoiners, the rare exchanges serving Lebanese bank accounts price bitcoin purchases in dollars.
Due to rampant inflation of the Lebanese currency, buyers are offered a pittance in bitcoin for their fiat, sources on the ground tell CoinDesk. The same exorbitant fees for local on-ramps apply to grassroots trades as well, manifesting in the latter as premiums rather than currency conversion rates.
Four local traders listed on LocalBitcoins are working with bitcoin amounts worth more than $1,000 each. Because there are so few people on the ground willing to sell bitcoin for cash, such traders can generally charge a 10 percent premium compared to the broader market, one anonymous trader said.
Back in August, a Beirut-based bitcoiner told CoinDesk “there is demand, and supply, for over-the-counter [bitcoin] transactions” in Lebanon, although the local scene was unable to support the needs of less tech-savvy users. For example, Lebanese expat Eli Kopay in Finland told CoinDesk his family was trying to buy real estate when the banks shuttered international access. Now he’s trying to help his family, remotely, learn how to use crypto exchanges.
“All of a sudden you just can’t send you own money abroad,” Kopay said. “They don’t have bitcoin and my dad is so old-school that he doesn’t believe in bitcoin. … If it’s even possible [to buy bitcoin] now it would be too much [money].”
Despite all these hurdles, the anonymous trader is still advising Lebanese friends to find a way to buy bitcoin as they warily eye the threat of stricter capital controls on the horizon. Askar is even more optimistic about bitcoin’s prospects in Lebanon. He told CoinDesk:
“The amount being bought is increasing daily…We had many political round table discussions every night at the protest areas. In all discussions, bitcoin is present in one way or another,” he said.
Lebanon protest image via Shutterstock