Nada Al-Mallah Al-Bustani wrote in Al-Jumhuriya:
Technological advances and artificial intelligence may be the most powerful tools of change in our world today, as new innovations are emerging to challenge traditional ways of doing business. In recent years, blockchain technology, the basic mechanism for cryptocurrency, has gained great popularity. This network enjoys its decentralization, its remoteness from government decisions, as well as its accompanying fraud risks with a minimum, which made it the preferred alternative for many investors as well as individuals. Also, some companies are accepting cryptocurrencies as a means of payment instead of traditional currencies. Can the cryptocurrency revolution revive the policies and strategies implemented after the stages of economic depression? Will the economic crisis in Lebanon be a driving factor towards adopting these innovative financial solutions? Can Lebanon enter history to be a race with some countries that have started to legally adopt cryptocurrencies?
In the Lebanese scene, we find that all those involved in finding solutions to the country’s economic problem may either be unable to stabilize the exchange rate of the lira, or that their policies adopt the approach of fluctuating the exchange rate on the black market to mitigate the shock of lifting the gradual subsidy, especially on petroleum products. We also see that all solutions are in fact partial and circumstantial solutions, as the deduction of deposits is almost heretical, while the tax system with open smuggling is in a coma, and as for raising the debt ratio in Lebanese pounds, it is without a clear plan.
All of the above are just superficial solutions that address symptoms without problems, and they affect the interests of a few, and are far from saving the Lebanese people themselves. Where are the policies for activating systems to stimulate startups? Where are the facilities for investors in finding alternative national products? Have successive governments considered financial innovations and cryptocurrencies as a potential solution to our economic catastrophe? Or included it on her agenda Less Faith?
Of course, dealing with cryptocurrencies somewhat pulls the rug out from under the ruling authority, as the Central Bank is unable to monitor and regulate it, and it also lacks the necessary foreign currency reserves to support it in light of its constant evaporation from the “semi” mandatory reserve.
We ask here: What happened when the Governor of the Banque du Liban put forward the E-Lira project? Was it just a media bubble or a personal idea? The digital currency is a practical way to exchange currencies under the supervision of the Banque du Liban, which facilitates commercial operations between entrepreneurs and small and medium enterprises, without the need to deal with foreign currencies that are becoming increasingly difficult to obtain day by day, especially since the Lebanese are in front of a list of priorities that begin with paying The price of fuel goes through school fees, and he wants it not to end with a bill for hospitalization and medical treatment, because he provides himself with operations that alleviate the financial deficit in foreign currencies in any financial transaction that he conducts outside the country.
In return to reality, cryptocurrencies will support small and medium-sized companies in particular in their accelerated growth, as well as motivate large industrial and commercial companies to find alternative solutions to the US dollar crisis and the misfortunes of the black market. Rather, they can then carry out borrowing operations for small sectors within a decentralized system that is popular in developing countries of the world.
The reality of Lebanon’s banking, and the humiliation to which the citizen is subjected to withdrawing his savings, would divert the attention of the customer towards solutions outside the system of the authority – the banking sector, which found itself in its labyrinth, the only orphan. Today, he may be inclined to take risks and adopt the cryptocurrency system in its decentralization, then he will never wake up to the Heract or other sudden policies that central banks can implement within the scope of their control.
The two main advantages of the cryptocurrency, in Lebanon in particular, lie in its departure from the control of the ruling authority, which did not provide an opportunity but challenged the interests of the citizen at the expense of its own interests and political maneuvers. Likewise, from a practical point of view, the Lebanese will not need to stand in queues to obtain his money, nor distill it within vague circulars, nor be exposed to the risk of theft if he travels with his money.
Studies that have been applied to many countries that have faced a severe economic crisis, “all of which Lebanon has gathered in its economic crisis,” show that a percentage of citizens are inclined to adopt cryptocurrencies as an alternative value to their national currency. Therefore, we can relate the rise in the value of cryptocurrencies to the emergence of financial crises in the world due to the increase in demand versus supply.
The wisdom of the Lebanese citizen and his bitter financial experience of nearly forty years, makes him inclined to the demand for cryptocurrencies, such as Bitcoin. Even if it showed fluctuations in its value, it has proven its long-term resilience and its value has increased exponentially since the beginning of its offering. From a profitable business perspective, there is no investment that does not know a margin of risk, and the Lebanese have become convinced that the greater margin of risk lies in standing idly by, submitting to the status quo without finding alternative solutions.
We do not disagree on diagnosing the reality of the economically ill country, but there is no objection to diversifying the treatment sources. Therefore, the Economic and Financial Authority must re-evaluate its policies, and look for ways to develop the work of individuals, companies and institutions to be an alternative to the rentier system, not to replace one source with another. The adoption by the Lebanese state of a basket of cryptocurrencies would provide the local market with important advantages, in its low cost, and the transparency of dealing with it if it is regulated, thus supporting entrepreneurship in a greater way. Most important of all, it reduces poverty levels, as happened in some developing countries.
For example, as of last September 7, Bitcoin became an official currency in El Salvador alongside the US dollar, after this country became the first to adopt the cryptocurrency as a legal currency in its daily trading, as it previously confirmed that it had bought 400 Bitcoin units, i.e. Equivalent to about 20 million US dollars.
Cryptocurrency proponents argue that this move would make it cheaper and easier for migrants to send money home, which is crucial because these remittances represent more than 24% of the country’s GDP and half of the total income of two-thirds of its households. Improving citizens’ easy access to financial services.
On the other hand, there are fears of adopting this currency, which witnessed fluctuations in its exchange rates, which makes it a source of concern for economic stability in El Salvador. After reaching an all-time high of more than $60,000 per bitcoin in April 2021, its value nearly halved in early summer.
Today, citizens of El Salvador will be able to pay taxes in bitcoin, and stores will be able to display prices in cryptocurrency. Crypto funds that are exchanged will not be subject to capital gains tax. The Salvadoran government, led by its “Middle Eastern origin” president, is also preparing to support this cryptocurrency for months, by installing ATMs, to allow citizens to transfer between the two official currencies in the country (the US dollar and Bitcoin).
The government also launched its own digital wallet called “Chivo”, which gives its users the equivalent of $30 in bitcoin for free, to encourage them to adopt the new currency.
Will this financial similarity between El Salvador and Lebanon in its dependence on remittances of immigrants and its living through the period of economic depression have an inspiring role for decision-makers in Lebanon? Or will they enjoy the game of fluctuating the price of the dollar on the black market as a temporary solution until the death of the citizen and the country? And if, in crises, we are not motivated to find alternative solutions, to evaluate, regulate and legalize possible financial innovations, when will that be?