Lebanon’s underground cryptocurrency market(restofworld.org)
restofworld.org
Lebanon’s underground cryptocurrency market
https://restofworld.org/2021/the-cryptocurrency-dons-of-beirut/
89 comments
I guess that a similar story could have happened to Greece. Nice to hear that crypto is helping people in such dire need of economic stability, although it was not clear from the article what happens to the lebanese cash that was used to purchase USDT. Someone must be left holding the bag, there must be some FX liquidity that they tap into?
Think of it as a remmitance system, relatives overseas send money to family in lebanon in bitcoin, these individuals but it off them for cash, they also sell bitcoin to anyone who liquidates local assets for cash and wants to gtfo of Lebanon. Crypto is basically keeping the market somewhat liquid at this point.
If I were to summarize the Greek situation it is a story about two countries that hate each other but share the same currency. Unfortunately there is no more nuance to be had. It really is that simple.
What a terrible, and dare I say, wrong summary. It's more like politicians staying on irrational positions because changing it would mean things like political suicide (by low-information populist voter outrage)/admission of being wrong.
> it was not clear from the article what happens to the lebanese cash that was used to purchase USDT
They are purchasing using hard cash (ie USD) outside Lebanon and then transferred there. The article is a bit confusing but this is the key bit:
An agent in Nigeria will collate these sums, buy USDT, and send it to one of the top-level suppliers in Lebanon. Once they have sold it on, they will disburse cash to the originally intended recipient of the remittance.
It's a way to transfer USD (value) to your family in Lebanon. The dealer in Lebanon gets Tether (from the agent in Nigera), and gives cash USD to the family in Lebanon, minus their commission.
The Lebanese pound is never used.
They are purchasing using hard cash (ie USD) outside Lebanon and then transferred there. The article is a bit confusing but this is the key bit:
An agent in Nigeria will collate these sums, buy USDT, and send it to one of the top-level suppliers in Lebanon. Once they have sold it on, they will disburse cash to the originally intended recipient of the remittance.
It's a way to transfer USD (value) to your family in Lebanon. The dealer in Lebanon gets Tether (from the agent in Nigera), and gives cash USD to the family in Lebanon, minus their commission.
The Lebanese pound is never used.
Is crypto involved in any way, or is it just USDT, a centralized USD token, on centralized exchanges?
I guess the agent probably has to buy bitcoin and exit if on some dollar offramp to get actual USD to give the family.
I guess the agent probably has to buy bitcoin and exit if on some dollar offramp to get actual USD to give the family.
USDT is hosted on Ethereum. The value of the USDT coin does not come from cryptocurrency as you've correctly pointed out, it comes from centralized authority backing USDT. But what part does come from cryptocurrency is the decentralized tracking of account balances. If it were't for the Ethereum blockchain, the only alternative would be to get physical USD into the country or for a Lebanese individual to open up a bank account denominated in USD (which is most likely illegal and impossible). So crypto is actually part of the solution here. Hope that makes sense
Tether is on record as censoring transactions (remember the Poly Network fiasco?). They are clearly centrally controlled despite being a token on the Ethereum network.
Whether they should have censored transactions in that instance is irrelevant. The fact remains that the coin does not belong to it's holders.
Whether they should have censored transactions in that instance is irrelevant. The fact remains that the coin does not belong to it's holders.
its not illegal or impossible to open a USD bank account for the lebanese. In fact, its extremely common.
The problem is that now it just extremely risky
Most of the upper class has the USD denominated savings effectively kidnapped by their bank institution. Those funds are frozen or very highly capped (only say $200 $USD draw per week). No one can take them out in large chunks. It is extremely difficult to make payroll for staff (many companies paid payroll in USD instead of lira before the crisis).
You can use USD deposits to buy assets or cancel debt though. As long as the receiver / beneficiary of your money another lebanese bank. So, you can pay your debts, or transfer your money to someone else in lebanon. But you can't take physical dollars out for the same purpose.
There is also the concept of "fresh money" by which the bank will let you take out any money that you have recently received from abroad. That's what is making everyday living bearable for a lot of lebanese
The problem is that now it just extremely risky
Most of the upper class has the USD denominated savings effectively kidnapped by their bank institution. Those funds are frozen or very highly capped (only say $200 $USD draw per week). No one can take them out in large chunks. It is extremely difficult to make payroll for staff (many companies paid payroll in USD instead of lira before the crisis).
You can use USD deposits to buy assets or cancel debt though. As long as the receiver / beneficiary of your money another lebanese bank. So, you can pay your debts, or transfer your money to someone else in lebanon. But you can't take physical dollars out for the same purpose.
There is also the concept of "fresh money" by which the bank will let you take out any money that you have recently received from abroad. That's what is making everyday living bearable for a lot of lebanese
Thanks for providing some nuance on the banking accounts. It's helpful to be able to compare crypto's impact (which I still think is substantial) against a realistic situation instead of the "centralized strawmen" that seem so common in crypto arguments.
It's worth noting that this - and other non-crypto remittance schemes - rely on the end exchange agent having access to large amounts of physical US cash.
This article doesn't go into where that comes from, but it's not unusual for criminal gangs to launder money this way. The agent themselves might not be a criminal, but they take often use the cash supplies from one and transfer back the value somewhere else (via a legitimate business) less a commission.
This article doesn't go into where that comes from, but it's not unusual for criminal gangs to launder money this way. The agent themselves might not be a criminal, but they take often use the cash supplies from one and transfer back the value somewhere else (via a legitimate business) less a commission.
> Someone must be left holding the bag, there must be some FX liquidity that they tap into?
You must have missed that 1. Lebanon is very corrupt and 2. there is an official exchange rate. Someone is making a killing selling on the black market and buying with the official rate.
You must have missed that 1. Lebanon is very corrupt and 2. there is an official exchange rate. Someone is making a killing selling on the black market and buying with the official rate.
Yes, this is the interesting part of the story. I was just wondering how it works exactly. Is there a black market lebanese pound / USD? There is no mention of this in the article. Or do they use some kind of offical lebanese pound / USD exchange? If so how does that work, can you just show up at some office somewhere with local currency and get USD?
Yes, there is.
Its about 18,000 to 1 USD, at the moment.
It was 1,500 back in Sept 2019, and as the article states, it was at this rate since the 70s.
Source: https://lirarate.org/
Its about 18,000 to 1 USD, at the moment.
It was 1,500 back in Sept 2019, and as the article states, it was at this rate since the 70s.
Source: https://lirarate.org/
Lebanese reserves of USD and other hard currencies are rapidly dwindling and going LBP -> USD at the official rate is now only permitted for "essential imports." Essentially the central bank will allow you to convert your LBP for USD at the preferred rate only if you are using those dollars to import things like medicines. Of course since Lebanon is incredibly corrupt there are probably people who are "importers" who overstate their imports so they can get more dollars and arbitrage the difference between the rates. Ordinary people can only convert only small amounts of LBP at local banks at a worse-than-official rate so they go to the "black market" which is basically just a bunch of street vendors and guys organizing on WhatsApp (https://www.aljazeera.com/economy/2020/5/29/like-a-drug-deal...).
You are confused (though your username is mathgenius haha). The guy in the article is exactly doing that. He is the black market for Lebanese pound / USD (in this case USDT).
Obviously, he'll need to run a full circle (back from Lebanese pound to USD) to refuel his reserves. In some countries where I have seen this, this is usually done through companies which have some license to buy USD at the government exchange rate to import stuff. Stuff is imported from offshore companies run by these same guys who will sell this product at some crazy markup (usually 100%) and then this profit is dumped through guys like in the article. Rinse and repeat.
Obviously, he'll need to run a full circle (back from Lebanese pound to USD) to refuel his reserves. In some countries where I have seen this, this is usually done through companies which have some license to buy USD at the government exchange rate to import stuff. Stuff is imported from offshore companies run by these same guys who will sell this product at some crazy markup (usually 100%) and then this profit is dumped through guys like in the article. Rinse and repeat.
Lebanon has a pretty large diaspora outside of the country (and with income in real currencies). And the current government is pretty corrupt.
I wonder if the best strategy here isn't for the diaspora to just buy back the country for pennies on the dollar during the current collapse.
I wonder if the best strategy here isn't for the diaspora to just buy back the country for pennies on the dollar during the current collapse.
Good luck dealing with Hezbollah with mere cash.
Edit: Judging by the downvotes, people aren't aware that Hezbollah is a major political party in Lebanon holding 13 seats: https://en.wikipedia.org/wiki/Hezbollah_political_activities
They also have their own private army:
The Taif Agreement signed in October 1989 to end of the Lebanese civil war, besides other things, called for the disarmament of all national and non-national militias. Hezbollah was allowed to stay armed in its capacity as a "resistance force" rather than a militia
https://en.wikipedia.org/wiki/Hezbollah_political_activities...
Edit: Judging by the downvotes, people aren't aware that Hezbollah is a major political party in Lebanon holding 13 seats: https://en.wikipedia.org/wiki/Hezbollah_political_activities
They also have their own private army:
The Taif Agreement signed in October 1989 to end of the Lebanese civil war, besides other things, called for the disarmament of all national and non-national militias. Hezbollah was allowed to stay armed in its capacity as a "resistance force" rather than a militia
https://en.wikipedia.org/wiki/Hezbollah_political_activities...
Lebanese issue is that it is being held hostage by a militia (Huzb Allah). No amount of money is going to help until these militias are disbanded and a national independent military is put into place.
Besides having a giant diaspora, this diaspora still has strong ties to the motherland and many of them are also very rich. Lebanon could then come back quickly and reach western levels of development and wealth.
Besides having a giant diaspora, this diaspora still has strong ties to the motherland and many of them are also very rich. Lebanon could then come back quickly and reach western levels of development and wealth.
Do you have experience in Lebanon? The only areas that are well managed (relatively speaking) are the ones run by Hezbollah.
Let's say you build the perfect monetary policy into a cryptocurrency. Okay, now the basic institution of money is working again but what about everything else?
>Over the last two years, Lebanon has been gripped by an economic death spiral, the culmination of years of government corruption and mismanagement. The electricity supply has collapsed, pharmacies and gas stations are empty,
The article mentions infrastructure. First, how do you use cryptocurrencies with limited access to electricity? Second, how does cryptocurrency help with physical infrastructure? Have there been successful cases of countries with private infrastructure? Has there ever been an ICO to pay for a cell phone tower or a solar farm?
>Over the last two years, Lebanon has been gripped by an economic death spiral, the culmination of years of government corruption and mismanagement. The electricity supply has collapsed, pharmacies and gas stations are empty,
The article mentions infrastructure. First, how do you use cryptocurrencies with limited access to electricity? Second, how does cryptocurrency help with physical infrastructure? Have there been successful cases of countries with private infrastructure? Has there ever been an ICO to pay for a cell phone tower or a solar farm?
The idea, in Bitcoin standard, is that government projects should be financed with taxes; not by printing money. When money has no cost, it inevitably results in loss of responsibility and capital mismanagement. The usual story is that government uses the money printer to enrich themselves, and also funds an army to keep people from overthrowing them.
When government is funded with taxes, there are limits on how much can be spent, and spending follows democratic principles and responsibility. Authoritarian or incompetent governments wouldn't be able to fund themselves, when people refuse to pay taxes to them. This works, because bitcoin can't be inflated and it can't be confiscated.
When government is funded with taxes, there are limits on how much can be spent, and spending follows democratic principles and responsibility. Authoritarian or incompetent governments wouldn't be able to fund themselves, when people refuse to pay taxes to them. This works, because bitcoin can't be inflated and it can't be confiscated.
> The idea, in Bitcoin standard, is that government projects should be financed with taxes; not by printing money.
I do think many Bitcoin enthusiasts might philosophically agree with the general viewpoint that paying for Government projects with taxes is a better alternative than debasing the currency, but I'd think Bitcoin itself is totally agnostic as to what Government needs to exist or how Government should be financed.
I do think many Bitcoin enthusiasts might philosophically agree with the general viewpoint that paying for Government projects with taxes is a better alternative than debasing the currency, but I'd think Bitcoin itself is totally agnostic as to what Government needs to exist or how Government should be financed.
Except of course that when incompetent or authoritarian governments have to borrow or seize money they need to cover up shortfalls, the consequences aren't exactly better...
And it's not like crypto removes the notion of wealthy elites capturing the revenue of money printing, it just moves them and their money a long way from the local economy, requires them to spend a lot of money on burning power and removes any incentive for them to spend it on local roads or schools.
And it's not like crypto removes the notion of wealthy elites capturing the revenue of money printing, it just moves them and their money a long way from the local economy, requires them to spend a lot of money on burning power and removes any incentive for them to spend it on local roads or schools.
> Have there been successful cases of countries with private infrastructure?
Infrastructure generally starts out private and gets nationalized over time.
Infrastructure generally starts out private and gets nationalized over time.
Are you sure it doesn't go the other way?
Yes, I am. As an example, the French public retirement pension system was built after WWII from a multitude of private pensions that were put in place over decades by various unions/corporations/guilds.
Privatizations also happen, it's not an irreversible process, but over a scale of centuries I think the tendency is towards nationalization of utilities. (Though the US is an outlier in how little it nationalizes)
Privatizations also happen, it's not an irreversible process, but over a scale of centuries I think the tendency is towards nationalization of utilities. (Though the US is an outlier in how little it nationalizes)
>Have there been successful cases of countries with private infrastructure?
The US's energy infrastructure was originally private.
The US's energy infrastructure was originally private.
This is precisely an attribute of the story-line from the game Escape from Tarkov that I didn't understand. It's set in a modern post world-war russia and most of the transactions are completed in the game's "crypto ruble". You can mine currency with GPU's etc outside of the FPS portion of the game. However, without well maintained networks and electrical grids how on earth would a PoW or PoS crypto exist at all?
> First, how do you use cryptocurrencies with limited access to electricity?
You only need to charge your phone once per day. If power goes out, no problem. If you have no electricity at home somebody close by probably has a phone charging business.
You only need to charge your phone once per day. If power goes out, no problem. If you have no electricity at home somebody close by probably has a phone charging business.
What's powering the cell towers?
Valid question, but anecdotally, travelling often in the third world, 4G is always available, even when the whole neighborhood goes dark. Most homes use 4G routers (with a battery, basically a headless phone with a hotspot) for internet, for this reason.
Yup. Earlier this year there was a major cascading blackout in Central America. It affected all of Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica. I chatted with friends in all of those countries and it seemed that everyone's phone/internet was working well. Those who were working remotely, continued working with their laptops and tethered mobile internet from their phones during that morning.
Does the phone / mobile network go offline during electricity blackouts in the first world?
Where I live the traditional non-voip landlines, and the mobile network have almost always worked when there is no electricity.
Where I live the traditional non-voip landlines, and the mobile network have almost always worked when there is no electricity.
> First, how do you use cryptocurrencies with limited access to electricity?
With a mobile phone. Unless network communications are also down...
With a mobile phone. Unless network communications are also down...
The article has a numerator but not a denominator:
> Accurate data on the overall volume of cryptocurrency trading in Lebanon is all but impossible to obtain, due to the informality of the market. Demand fluctuates with the rise and fall of the global cryptocurrency market, but OTC suppliers estimated trading volumes across Lebanon of up to 10 million dollars per week at high points
So… 10 000 000 USD moving via crypto per week of i USD total currency movement per week.
Without this number it’s hard to tell if this is a significant new trend, or just fringe.
> Accurate data on the overall volume of cryptocurrency trading in Lebanon is all but impossible to obtain, due to the informality of the market. Demand fluctuates with the rise and fall of the global cryptocurrency market, but OTC suppliers estimated trading volumes across Lebanon of up to 10 million dollars per week at high points
So… 10 000 000 USD moving via crypto per week of i USD total currency movement per week.
Without this number it’s hard to tell if this is a significant new trend, or just fringe.
Greece and Lebanon share similar culture and genetic makeup from their levantine / hellenistic past.
Greek Uzoo = Lebanese Arak Greek Yogurt = Lebne / Labne Greek Orthodox = Lebanese Maronite Olive oil on everything = Olive oil on everything and so on.
Now they also share similar economic meltdowns.
Greek Uzoo = Lebanese Arak Greek Yogurt = Lebne / Labne Greek Orthodox = Lebanese Maronite Olive oil on everything = Olive oil on everything and so on.
Now they also share similar economic meltdowns.
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> cryptocurrency is purchased abroad, sent to Lebanon, and then distributed
That's not how it works. Cryptocurrency is not geographically bound.
That's not how it works. Cryptocurrency is not geographically bound.
It is though. I think you missed the part where it says you can't buy cryptocurrency from within Lebanon except with hard cash and from one of the exchangers. These exchangers have to get the cryptocurrency from somewhere to begin with. They mention that they wire the money to Nigeria and let someone there buy it for them.
Yes, money is geographically bound, which is why they need to wire it to Nigeria. But once cryptocurrency is bought with Nigerian funds, there is no "sending" it to Lebanon. That part is misleading. Sending is done not from one geographic location to another but from one owner to another.
Today's currency is all digital and is just a number, yet we say "we're sending it". You're taking the metaphor too literally.
Digital doesn't automatically mean that it's not geographically bound. If the servers that store it, banks that manage the accounts, state that issues the currency, and businesses that accept the currency are all geographically bound, digital currency is geographically bound. Crypto is less geographically bound by nature, because it's a distributed ledger. And the more successful crypto ledgers are globally distributed and this not really geographically bound.
That's like saying there is no "sending" an email to Lebanon. Sure you may be technically right but everyone understands what is meant, and in consequence it is equivalent to physically sending.
There’s always that one guy:
> “That’s my reputation,” Baasiri said. “Gravity fucks the market.”
5% commissions on transactions though, that’s really steep!
> “That’s my reputation,” Baasiri said. “Gravity fucks the market.”
5% commissions on transactions though, that’s really steep!
Businesses in the developed world pay visa and mc and amex close to 3%.
I wish it was that low, once you account for forex + intermediate processor fees. More like 4-5%.
Fees seem to be capped in the EU since 2015. 0.3% to 1.9% depending on the transaction.
https://www.mastercard.co.uk/en-gb/vision/terms-of-use/Inter...
https://www.mastercard.co.uk/en-gb/vision/terms-of-use/Inter...
It's supply and demand. Nobody wants cash, everyone wants cryptocurrency.
Nope, 5% means the black market is quite efficient. Black market operates on high-yield since they are illegal, hard to circumvent and usually monopolized by a few.
Biggest question -- can ETH/BTC completely operate under the table?
There are two things that one needs (in addition to the software, which is free and open source) to connect to the bitcoin peer-to-peer network - Electricity and Internet Connectivity.
Unless states start interrupting either/both, there is no table to be operating under. It just is. It is the table and the chair and the entire economy.
Unless states start interrupting either/both, there is no table to be operating under. It just is. It is the table and the chair and the entire economy.
Technically you don't even need an internet connection: https://blockstream.com/satellite/
How are you going to transmit transactions though?
Transactions are pretty small, as long as you have some way to relay data to a party that has an internet connection, you can submit a transaction. The party you submit the transaction to does not need to be fully trusted, worst they could do is not submit it to the network.
yes, you could trade crypto for cash. there are some trust issues though (will they run off with the crypto AND the cash?) and the fees are high
Being in a third-world country and part of the crypto community feels so liberating. You can feel the difference between you and a non-crypto person.
How is it different? How many goods and services can you pay for with cryptocurrency where you live? What if your government's goons (or private goons for that matter) hit you with a rubber hose and steal your coins? Who will help you?
You don't need to buy goods and services directly but it is a good way to store and invest your wealth. Most capital controls are mute once you've exited into crypto.
On what basis do they hit you? Anyone that ever has any link to crypto? That's everyone. Crypto has a level of security and plausible deniability, that makes such things unrealistic. That's why you don't hear about it happening often.
To many people under these regimes, there is much more security afforded to them by crypto than by their governments and currencies.
On what basis do they hit you? Anyone that ever has any link to crypto? That's everyone. Crypto has a level of security and plausible deniability, that makes such things unrealistic. That's why you don't hear about it happening often.
To many people under these regimes, there is much more security afforded to them by crypto than by their governments and currencies.
>>> it is a good way to store and invest your wealth
until it goes to literally zero, which IMHO seems more likely every month
until it goes to literally zero, which IMHO seems more likely every month
It’s likely that the alternatives also run a similar risk with less upside.
Understandably its a lot nicer to know your money doesn't evaporate.
Just to add that many South Africans are importing and reselling crypto through a legal loophole. [1] Only "exporting" crypto is illegal.
There are highly liquid international markets for our currency vs other fiats. The government has relaxed capital controls substantially over the last 20 years.
Right now the focus of government is taxing crypto. Capital controls are taking a back seat, because enough Dollars are coming into the country to pay for imports. External debt is minimal.
[1]: https://www.ovex.io/blog/crypto-arbitrage-101/
There are highly liquid international markets for our currency vs other fiats. The government has relaxed capital controls substantially over the last 20 years.
Right now the focus of government is taxing crypto. Capital controls are taking a back seat, because enough Dollars are coming into the country to pay for imports. External debt is minimal.
[1]: https://www.ovex.io/blog/crypto-arbitrage-101/
> How is it different?
You don't get 50% dilution of your savings within a year.
> How many goods and services can you pay for with cryptocurrency where you live?
In a liquid market, you can convert your weekly needs and pay using cash.
> What if your government's goons (or private goons for that matter) hit you with a rubber hose and steal your coins?
If they are going to do that (and some countries do that), they'll start with bank accounts and visible shit (goods moving in the street).
You don't get 50% dilution of your savings within a year.
> How many goods and services can you pay for with cryptocurrency where you live?
In a liquid market, you can convert your weekly needs and pay using cash.
> What if your government's goons (or private goons for that matter) hit you with a rubber hose and steal your coins?
If they are going to do that (and some countries do that), they'll start with bank accounts and visible shit (goods moving in the street).
You don't get 50% dilution of your savings within a year.
Although if you're measuring bitcoin against the USD, you could have done that in May :)
Although if you're measuring bitcoin against the USD, you could have done that in May :)
BTC isn't the only option if you are using crypto. Especially in emerging markets, stablecoins seem to be a popular choice.
The article implies that almost all of this cryptocurrency is in USDT,So that argument doesn’t apply.
Currencies inflate only. Bitcoin fluctuates. It's not the same kind of exposure. (though a consumer might have a hard time catching the upside and avoiding the downside).
How would you describe that difference?
Not paying taxes to a corrupt managerial elite is one of them
Most of these countries finances are based on direct unavoidable taxes as they are already struggle to collect taxes the western way due to low compliance.
What's the western way? Don't you mean the US way?
In western Europe most places tax at source, which means your wages are taxed before they are sent to your bank. This sort of direct taxation ensures more compliance. I think rather the issue is that many places will deal in cash, where it is easier to avoid tax.
In western Europe most places tax at source, which means your wages are taxed before they are sent to your bank. This sort of direct taxation ensures more compliance. I think rather the issue is that many places will deal in cash, where it is easier to avoid tax.
US v. western Europe is distinction without a difference. Tax evasion is typically spread throughout the whole money lifecycle, from wage payments (where cash is used), to black-market purchases, to business deals (also in cash), to black-market imports and exports, etc.
Not if you are employing your workers illegally and paying them with cash. Of course, each country is different and has different levels of control. Some which lack any control will just tax unavoidable items (like cars for example) to compensate. These are harder to smuggle and easier to catch.
> In western Europe most places tax at source, which means your wages are taxed before they are sent to your bank.
The US does this too; it's known as "withholding". There are also "estimated taxes" paid quarterly if you have significant income outside of regular employment and thus not subject to withholding. You still have to settle up at the end of the tax year, but by that point the vast majority of the tax (and perhaps a bit more) has already been paid.
The US does this too; it's known as "withholding". There are also "estimated taxes" paid quarterly if you have significant income outside of regular employment and thus not subject to withholding. You still have to settle up at the end of the tax year, but by that point the vast majority of the tax (and perhaps a bit more) has already been paid.
Crypto supporters will talk about how great this is. But is this what we want the world to look like? It's effectively a network of little mafiosi (complete with thugs) providing tenuous bridges to the US economy.
In a cynical moment, despite the idealist beginnings, it's almost like Satoshi was the NSA and global fiscal integration beyond conventional reach of multinationals and the world bank was the objective. Sigh.
In a cynical moment, despite the idealist beginnings, it's almost like Satoshi was the NSA and global fiscal integration beyond conventional reach of multinationals and the world bank was the objective. Sigh.
i think you missed the part where the real mafiosi broke a country of 6M people.
This allowed a few average-but-enterprising laymen -willing to take on risk- to step up to the plate, make some good money, while also helping the world look a little better for those 6M souls in dire straits trapped in a sh*tshow economy.
This allowed a few average-but-enterprising laymen -willing to take on risk- to step up to the plate, make some good money, while also helping the world look a little better for those 6M souls in dire straits trapped in a sh*tshow economy.
> That’s when Lebanon’s cryptocurrency market took off, along with the OTC system run by traders like Awad. The OTC ecosystem here largely operates using Tether, a cryptocurrency pegged to the U.S. dollar and therefore subject to fewer price fluctuations. The process works like this: A client who wants to buy cryptocurrency will usually open a wallet on an exchange (the most popular in Lebanon being Binance) and then meet with an OTC dealer to hand over cash dollars. The dealer will send the same amount of Tether — minus a commission ranging from 0.5%–5% — to their account via a peer-to-peer transaction. The client can then pursue whatever crypto-investment strategy they see fit with the USDT in their digital wallets.
From the frying pan (domestic currency in shambles), into the fire (crypto waiting to implode).
Tether's many problems have been documented elsewhere. What this implies is that the funds being spent by the Lebanese in this story are very likely going into financial speculation, not day-to-day requirements like buying food. And they're using the absolute worst vehicle for doing that.
A ticking time bomb.
From the frying pan (domestic currency in shambles), into the fire (crypto waiting to implode).
Tether's many problems have been documented elsewhere. What this implies is that the funds being spent by the Lebanese in this story are very likely going into financial speculation, not day-to-day requirements like buying food. And they're using the absolute worst vehicle for doing that.
A ticking time bomb.
The article mentions the Lebanese pound has "lost more than 90% of its value". For an equivalent loss in value from holding USDT that would mean that each USDT is only backed by 10 cents of value? I mean there are certainly arguments to be made about how much value is actually backing USDT but to claim that it's only 10% seems way off. I think people would be shocked and there would be crypto-wide panic if USDT dropped to 85 cents on the dollar. If USDT 'collapses' that does not mean that one USDT is worth 0$ only that the value drops enough that it causes a structurally significant sell-off. This is what people worry about, not USDT becoming worthless. If I'm Lebanese, yes I'll take the USDT
To give maybe a good parallel take a look at clients of Bernie Madoff's fund. This was by all measures considered a 'collapse' and a 'disaster' but when all was said and done clients still recovered 70-80% of their claims. Granted it took a long time ~10yrs or so but still a very far cry from 10%
To give maybe a good parallel take a look at clients of Bernie Madoff's fund. This was by all measures considered a 'collapse' and a 'disaster' but when all was said and done clients still recovered 70-80% of their claims. Granted it took a long time ~10yrs or so but still a very far cry from 10%
It look like cryptocurrency is used as a remittance rails, so the actual people in Lebanon receive dollars. It's a great use case.
People say this stuff as if the fiat system isn't a corrupt bomb that's constantly blowing up.
Capitalism is the corrupt bomb that keeps blowing up. Fiat money is just on of its many mediums with which is props itself up after it explodes.
But crypto is also capitalist, and it explodes a lot more often than regulated, fiat commerce.
I think it's wrong to assume its just speculation. Lebanon is a troubled country, and if I've heard correctly their local currency is inflating. So they could just be trying to protect their savings (earned from their labor in many cases no doubt) from being devalued. Perhaps they also want it protected by government confiscation. The might also just keep their funds in USD stable coins (tether is not the only one).