Lebanese are turning to crypto-remittances as trust in the country’s banking and financial sector plummets.
Those sending money to family in Lebanon cite faster and cheaper transactions as reasons for using cryptocurrency to remit compared to US dollars or local currency.
Lebanese have increasingly turned to cryptocurrency as a way to gain financial freedom during the ongoing banking and financial crises that erupted in late 2018 which saw the value of the local currency plummet while deposits are still holed up in banks imposing informal and illegal capital controls.
Lebanon is witnessing increased demand for cryptocurrencies as the lira continues its downward plummet and the economic situation worsens
“You would’ve never seen this before. It was only the elite that used to know about crypto and blockchain, but it’s sprinkling down to the masses, and this is interesting, but it’s not surprising,” Lara Abdulmalak, editor-in-chief at Unlock Blockchain told Arabian Business.
Jeremy Arbid, a Lebanese-American crypto enthusiast said he sends remittances to his family via his virtual wallet. Arbid will send his cousin Bitcoin, which can be done nearly instantaneously, and then the family member in Lebanon can find a buyer for the Bitcoin on the chatroom-style social media platform Telegram. In exchange, Arbid’s family gets cash they can use to buy food and staples for the family.
While Arbid sends Bitcoin, others Arabian Business spoke to said they sent money via stable coins – or cryptocurrency supposedly backed by a fiat currency – the most common of which is Tether USDT.
Tey El-Rjula, founder of peer-to-peer money exchange app Fluus, said that he takes USDT from his brother in exchange for a Netflix profile.
Lebanese banks have largely blocked international purchases and transfers, making things like paying for digital subscriptions nearly impossible.
According to research site CryptoCompare, around 80 percent of all cryptocurrency trading is done in USDT, which is allegedly pegged to the US dollar.
“People are familiar with the US dollar, and they trust the US dollar, and they need something digital that mimics that trust and mimics their knowledge of money,” El-Rjula said.
“So we see a lot of people transferring their US dollars or Lebanese lira into USDT and holding it on their Binance accounts.” Once it’s in an account on the cryptocurrency exchange platform, which Lebanese now only need a driver’s license to set up an account, USDT can be transferred or traded with other cryptocurrencies.
Bitcoin is highly volatile meaning it may not be the best cryptocurrency for sending remittances, claimed a blogpost from the London School of Economics on cryptocurrency’s use as a way to send remittances.
But Arbid said he wasn’t worried by Bitcoin’s volatility. “It’s not a large amount of Bitcoin, and basically I buy, send, and sell in a very short timeframe,” he said.
Remittance inflows to Lebanon, which made up 36.2 percent of the country’s GDP in 2020, are projected by the World Bank to decline by only 6.6 percent to $6.9 billion in 2020, despite the country’s financial crisis.
In absence of a formal framework, traders use a peer-to-peer swapping system, contacting one of a handful of established crypto-to-cash brokers in Lebanon or finding a buyer through social media.
Lebanon is on the US government’s Office of Foreign Assets Control sanction list so formal cryptocurrency remittance platforms registered in the US can’t do business there. Paxful, a US-registered company, said they don’t offer their services in Lebanon because of the country’s presence on the list.
Around 80 percent of all cryptocurrency trading is done in USDT, which is allegedly pegged to the US dollar.
There are no figures on how widespread the use of cryptocurrency to send remittances is, but people inside and outside…