Riad Salameh, Central bank governor, informed a congregation of officials that “We must prepare a Lebanese digital currency project” as a method to boost trust in the banking process.
As per state-run National News Agency, Salameh said “As for the monetary supply in the Lebanese market, it is estimated that there are $10 billion stored inside homes.”
The central banker stated that a digital currency venture rolled out in 2021 will assist in the creation of a cashless financial environment to improve the channeling of funds locally and overseas.
Lebanon depends largely on remittances made by its global diaspora. Last year, personal payments accounted for roughly 14% of Lebanese gross domestic product, as per World Bank. That figure hit 26.4% in 2004.
Salameh states that Lebanon will hold its gold reserves as cover against a broader market issue. If such a problem happens, the central bank can dilute its bullion on Forex markets for quick respite.
Banque Du Liban, the country’s central bank, has been pushing the plan of a state-run digital currency since the beginning of 2018. Steps seem to have been expedited earlier in 2020 after intense dissent and tacit bank runs ensured the suspension of Lebanon’s financial set up.
Banks also imposed stringent controls on overseas currency sales in view of the dollar shortage, with a minimum of one top financial institution restricting withdrawals to only $400 per month. A plummeting Lebanese lira made transactions in the domestic currency nearly impossible.
Back in June, the central bank of Tripoli set ablaze by rioters in a display of rage over the sharp weakening of the lira, which remains pegged at 1,500 per US dollar for a long time. The lira is forecast to plummet to over 5,000 per dollar before getting steady again.
The rising chaos over Lebanese fiat sparked a flurry of Bitcoin purchase among residents, with P2P marketplaces such as Localbitcoins witnessing a steep increase in business. It is not the first time Lebanon is going through political unrest.
The small Mediterranean nation is facing simmering difficulties in establishing itself after 15-year long civil unrest. Even when calmness prevailed, governing the country was a difficult process due to lack of coordination between autocrats who held the power.