TL; DR Breakdown
- Lebanon’s economy plunges into hyperinflation
- Bitcoin replaces Lebanon’s banking system
- Bitcoin mining in Lebanon
Lebanon’s citizens explain how bitcoin mining has replaced a broken banking system as the economy plunges into hyperinflation and the nation and banks impose steep haircuts on dollar withdrawals. The national locals are now mining bitcoin and using Tether to pay for goods since $1 is now worth 15 cents only.
Lebanon was known for having a reliable and welcoming banking system for investments. This was to meet the soaring demand for its citizens who are seeking financial freedom. Lebanon teamed with bitcoin mining businesses, dealers, and online mentors.
According to Mark Iskandar, who is the founder and CEO of the cryptocurrency firm Magma mining in Beirut, the first bitcoin ATM in Lebanon debuted on Hamra Street in the capital city of Beirut, and a second machine is on the way.
Lebanon encounters a financial crisis
Back in 2016, Georgio Abou Gebrael, a local architect, first heard about Bitcoin and thought it was a scam. In 2019, Lebanon was experiencing a financial crisis leading to the closure of banks and locals being exempted from withdrawing their funds from the banks.
When Gebrael was paid for his architecture job, he used the money to buy small bitcoins. Gebrael now earns 50% of his income from freelance work, 90% of which is paid in bitcoin. The other half comes from a salary provided in US dollars by his new architectural firm. Bitcoin has evolved into his bank in addition to being an easy method to make a living.
Bitcoin mining in Lebanon
The country is considered by many to be a failing state with a feeble and ineffective central administration. The collapse of its banking sector is one of its largest problems right now. It makes it difficult for the Lebanese locals to access their money and buy necessities like food.
In such a scenario, the private character of cryptocurrency is extremely appealing. In affluent areas of Beirut, over-the-counter traders act as an extension of informal money-changing networks, or “Hawala networks,” that can receive cash and exchange it for cryptocurrencies stored in digital wallets and vice versa.
The only steps involved in buying and selling USD Tether for dollars are installing a mobile app and providing contact details for a third party to handle the trade. Not only in Lebanon but also people all across the world have gravitated to cryptocurrency during periods of extreme inflation.
As a result, Lebanese law does not forbid cryptocurrency ownership, use, or trading; but, when it comes to their acceptance as a payment method, regulations only adopt fiat currencies that are recognized as legal tender.
What to do during hyperinflation?
When the price of goods and services rises at a monthly rate of 50% or an annual rate of 1,000% or more, these are signs that inflation is out of control. Hyperinflation can be caused by an oversupply of paper currency without a corresponding rise in the production of goods and services. In a period of hyperinflation, those with savings in banks or other financial institutions based on local paper currency can see a rapid fall in the real value of their savings. However, physical assets like land, factories, and machines will not lose their value. People in panic will tend to withdraw their funds from banks, which will result in a bank run, the worst scenario.
Once purchasing power evaporates, it’s gone for good. You’re better off proceeding with major purchases sooner rather than later in hyperinflation because if you don’t, those items will become more unattainable over time. This is not investment advice but something for those who have huge stashes set for later to think about. Read also tips on converting your cash.