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« BitCoin » or encrypted electronic money is considered as the currency that will change the banking world. It does not need any kind of banking intermediary; it is traded directly between individuals in a safe and encrypted manner. The currency has been widely excelled and already gaining rapid expansions. However, can the encrypted « BitCoin » be adopted in currency’s inflation crisis and what is the future of this idiosyncratic currency?
The first to launch the Bitcoin concept was Mr. Satoshi in a 2008. The latter describes it as an electronic monetary system based on "peer-to-peer" principle, which means the fact of « denoting or relating to computer networks in which each computer can act as a server for the others, allowing shared access to files and peripherals without the need for a central server2 ». The currency was first floated for trading in 2009, intended to change the global economy in the same way that the Web has changed its publishing means.
Bitcoin is an anonymous digital currency, with a conversion process that requires only the number of the person's wallet to be transferred to. The conversion is stored in Block Chain with a special serial number and does not include the name of the sender, the recipient, or any other data of the sender. This makes it a popular idea for both privacy advocates and online illicit e-commerce (such as drugs).
This encrypted money is based on three fundamental elements: peer-to-peer financial transactions, electronic signature and encryption between two persons without intermediary body that regulates such transactions. The currency is available globally and does not need complex requirements to use. It can be used in many online purchases, including books, gifts, or other web based services. It can be converted to other currencies such as the US dollar or the euro.
It is supported today by an increasing number of websites, including large and diverse companies, such as hosting services, domain names, and social networks, in additional to web-based product types. It can be converted to any currency in the world between online users. As a result, Bitcoin has its own exchange rate. According to Google, each Bitcoin equals today 9,278 US dollar.
Bitcoin is a decentralized, difficult to control currency. The legal nature of Bitcoin varies from country to country and remains an undefined legal nature; some countries have recognized it in particular and have permitted its trading, but others have prevented its use and the use of similar encryption systems.
This electronic currency can play a significant role especially in countries facing economic crisis, like Lebanon for example, where the Lebanese Liras is in real massive inflation, many are wondering whether the use of Bitcoin will be the alternative solution. For the Governor of the Lebanese Central Bank, « These [bitcoin] are not currencies but rather a commodity whose prices rise and fall without any justification. For this reason, Central Bank has banned the use of this currency in the Lebanese market. Elsewhere, he dismissed the crypto currency as “unregulated,” while reportedly referring to the technology as a threat to current payment systems. However, Governor Salame was bullish on the idea that money will eventually be digitized saying: We understand that electronic currency will play a prominent role in the future. But Central Bank must first make the necessary arrangement before taking this step and develop a protection system from cybercrime. However, he assumed that digital currency will be available in the next few years »4.
As a first impression, Bitcoin in Lebanon might not help the people, it will help the filthy dealers. For those who doesn’t know, in Lebanon there’s no 24/7 electricity, no reliable internet connection with a failing banking system on top. One anonymous (over-the-counter) OTC trader, « who has been operating in Lebanon since 2013, estimated that Lebanese people trade between $1 million and $5 million a month using informal networks, which dwarfs the $54,916 worth of Lebanese Bitcoin transactions tallied over the past year on Paxful and LocalBitcoins combined. He added the COVID-19 pandemic increased demand, and therefore the fees, of local hawala remittance networks. Now that hawala options are more expensive, by comparison, Bitcoin is a cheaper and more attractive option5 ».
Several Lebanese Bitcoin traders said in interviews with Al Jazeera that the volume of their trade had spiked since November, when capital controls were first introduced, with the value of transactions collectively reaching millions of dollars a month6. But how does it work? According to some resources, Moving money out of Lebanon via Bitcoin often begins with pairing buyers who want to convert foreign exchange or other hard assets into the crypto currency, with sellers who have a surplus of Bitcoin. The sellers profit from the transaction by charging a commission- typically between 1 percent and 5 percent of the total value of the hard asset being exchanged. Some buyers and sellers meet through groups on popular messaging apps like WhatsApp. In one such group, participants regularly post offerings anywhere between hundreds of dollars’ worth of Bitcoin, to hundreds of thousands of dollars’ worth. Houses, cars and phones have also been put up for sale in the crypto-currency on that single group of more than 250 members7. Once a buyer and seller are matched, the first and simplest involves meeting in person and exchanging physical cash for a Bitcoin transfer, a method referred to as 'over-the-counter' or OTC. Basically, they meet up in a Starbucks i.e., the buyer gives the seller money, and right there, the seller transfers the Bitcoin8.
But wait a moment, let’s get down to earth, lots of Lebanese people does not have access to their bank accounts. Many Bitcoin selling websites does not accept Lebanese credit card or Lebanese bank account to buy or sell cryptos. Most of other exchanges have the same rules towards Lebanon. So when the Lebanese central bank doesn’t recognize crypto-currency, it will obvious that using the world’s platforms anyway as Lebanese is the solution. Just to keep in mind as well that Lebanon is already banned from the world’s exchanges. The first step toward Bitcoin market will be by giving the access to the money in Lebanese banks. On the contrary, it is evident that Trading in Bitcoin will falls only on Fresh Money as an alternative to the Lebanese Banking system; therefore forget about your money in the banks.
To be fair, that step may seem far off today, especially in the context of a country where there are sparks of crypto-currency adoption. Bitcoin and crypto-currencies may not fully be able to help at scale yet, but in time, eroding trust in current financial systems ensures that this discussion will continue in places like Lebanon and beyond. Undeniably, if you want to go around the banking system, Bitcoin is a solution.
1. Picture courtesy to:
2. Oxford Language
3. https://www.coindesk.com/us-judge-bitcoin-money-coin-mx/.
4. https://www.coindesk.com/banque-du-liban-digital-currency/
5. https://www.coindesk.com/how-bitcoin-fits-into-lebanons-banking-crisis
6. https://www.aljazeera.com/ajimpact/distrust-lebanese-banks-spurs-bitcoin-boom-200224202742678.html
7. https://www.aljazeera.com/ajimpact/distrust-lebanese-banks-spurs-bitcoin-boom-200224202742678.html.