Rising from the Ashes: Bitcoin and Lebanon’s Path to Economic Recovery

Rising from the Ashes: Bitcoin and Lebanon’s Path to Economic Recovery. Lebanon’s Journey to Economic Revival via Bitcoin. The World Bank has identified Lebanon’s predicament as one of the direst crises globally since the mid-19th century, resulting from decades of reckless economic and monetary policies. These practices have caused the Lebanese currency to plummet by more than 95% in value prior to the downturn.

Amid this economic collapse and rampant corruption, the banking sector has also descended into chaos. Samar Hawa from Rebirth Beirut has observed the resultant hardships faced by the Lebanese populace.

Samar reflects on the resilience of the Lebanese people, comparing them to a Phoenix rising from the ashes, describing the situation as both beautiful and sorrowful. This view aligns with the goals of Rebirth Beirut, which aims to aid Lebanon through its economic and social recovery.

The Lebanese Pound, or Lira, has seen a drastic reduction in value, significantly impacting the financial stability of individuals like Samar, who have witnessed the erosion of their savings. Following October 17, 2019, even US dollar deposits were converted into ‘Lollars,’ a term coined by a local economist to describe the devalued state of banked dollars, effectively reducing $100 in the bank to a mere $10 in spending power.

This scenario highlights the severe financial crisis and the dangers of relying on third-party institutions, as seen in the insolvency risks banks face after a run. It points to the pitfalls of centralized decision-making, which may not always serve the public’s interest. Despite enduring four years of turmoil, Lebanon has yet to implement a capital control law or effective crisis management strategies. In contrast, bitcoin emerges as a viable alternative, championing self-custody and allowing individuals to manage their funds independently, offering a transparent system that avoids the risks of arbitrary devaluation and providing a decentralized, secure financial framework.

The Lebanese economy was further destabilized in 2019 by proposed tax increases on vital services, leading to widespread protests and banking closures that restricted access to funds for many, except the elite. This event precipitated a sharp decline in the value of bank deposits, propelling the economy towards collapse. The Lebanese Pound’s value plummeted from 1,500 LBP per dollar in October 2019 to around 89,000 LBP per dollar today, indicating a near 98.5% devaluation.

Lebanon defaulted on its debt for the first time in March 2020, a crisis exacerbated by a catastrophic explosion in Beirut on August 4, 2020, deepening the country’s socio-economic woes.

The public sector’s corruption has failed to provide essential services, highlighting the bleak situation. Yet, amidst this, bitcoin presents a compelling case. Georges Haddad, who returned to Lebanon post-collapse to contribute to its rebuilding, started VaultKi, emphasizing the importance of self-custody. He views bitcoin as a remedy to the fundamentally flawed global monetary system, particularly underscored by Lebanon’s economic vulnerabilities.

Rising from the Ashes: Bitcoin and Lebanon’s Path to Economic Recovery

With many Lebanese either unbanked or forcibly debanked due to the crisis, bitcoin also addresses the issues of cash hoarding and the distrust in banks, besides offering a defense against severe inflation and a bypass for unjust capital controls. Stablecoins serve as a temporary solution, providing easier access to dollars amidst the turmoil.

Rebirth Beirut has begun accepting bitcoin donations, funding initiatives like lighting up streets with cables from private generators.

Georges draws parallels between Lebanon’s situation and the potential collapse of larger economies, cautioning that such a downfall could occur rapidly. He reminisces about a time when Lebanon’s banking sector was a symbol of stability, now eroded by mismanagement and corruption. Bitcoin, according to Georges, not only serves as an alternative currency but as a critical reminder of the dangers of unregulated money printing and centralization.

He also highlights the significant role of Lebanese expatriates, who contribute substantially to the nation’s economy through remittances, advocating for bitcoin’s low-cost and efficient transaction capabilities.

Lebanon’s unique position, exacerbated by distrust in centralized authorities and endowed with untapped energy resources, positions it as an ideal candidate for bitcoin adoption and mining, potentially addressing long-standing electricity issues.

Samar and Georges maintain a cautious yet optimistic outlook for Lebanon, emphasizing the combined efforts of NGOs, the private sector, and the indomitable spirit of the Lebanese people as vital to the nation’s recovery. Bitcoin is celebrated not just as a financial instrument but as a beacon of innovation and change, heralding a new era where the resilience of Lebanon’s currency matches that of its citizens.

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About the Author: Bernard Aybout

In the land of bytes and bits, a father of three sits, With a heart for tech and coding kits, in IT he never quits. At Magna's door, he took his stance, in Canada's wide expanse, At Karmax Heavy Stamping - Cosma's dance, he gave his career a chance. With a passion deep for teaching code, to the young minds he showed, The path where digital seeds are sowed, in critical thinking mode. But alas, not all was bright and fair, at Magna's lair, oh despair, Harassment, intimidation, a chilling air, made the workplace hard to bear. Management's maze and morale's dip, made our hero's spirit flip, In a demoralizing grip, his well-being began to slip. So he bid adieu to Magna's scene, from the division not so serene, Yet in tech, his interest keen, continues to inspire and convene.