Lebanon’s underground cryptocurrency market
restofworld.org
restofworld.org
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.
I guess the agent probably has to buy bitcoin and exit if on some dollar offramp to get actual USD to give the family.
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
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.
Whether they should have censored transactions in that instance is irrelevant. The fact remains that the coin does not belong to it's holders.
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.
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/
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.
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.
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...
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.
>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 US's energy infrastructure was originally private.
Infrastructure generally starts out private and gets nationalized over time.
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)
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.
Where I live the traditional non-voip landlines, and the mobile network have almost always worked when there is no electricity.
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.
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.
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.
With a mobile phone. Unless network communications are also down...
> 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.
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.
That's not how it works. Cryptocurrency is not geographically bound.
> “That’s my reputation,” Baasiri said. “Gravity fucks the market.”
5% commissions on transactions though, that’s really steep!
https://www.mastercard.co.uk/en-gb/vision/terms-of-use/Inter...
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.
They say you need internet or sms additionally
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.
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.
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.
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.
until it goes to literally zero, which IMHO seems more likely every month
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).
Although if you're measuring bitcoin against the USD, you could have done that in May :)
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.
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.
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.
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%