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Lebanon’s underground cryptocurrency market

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Re: Lebanon’s underground cryptocurrency market

#71

Post by IG_Semmelweiss »

mathgenius wrote: post #61
csomar wrote: post #34

Earlier quoted context omitted.

> 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.

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/

Re: Lebanon’s underground cryptocurrency market

#72

Post by IG_Semmelweiss »

danield9tqh wrote: post #69
graeme wrote: post #51

Earlier quoted context omitted.

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.

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 ba…

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

Re: Lebanon’s underground cryptocurrency market

#73

Post by danield9tqh »

aazaa wrote: post #52

> 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…

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%

Re: Lebanon’s underground cryptocurrency market

#74

Post by el-salvador »

johnyzee wrote: post #66
jon-wood wrote: post #48

Earlier quoted context omitted.

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.

Re: Lebanon’s underground cryptocurrency market

#75

Post by IG_Semmelweiss »

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.

Re: Lebanon’s underground cryptocurrency market

#76

Post by danield9tqh »

IG_Semmelweiss wrote: post #72
danield9tqh wrote: post #69

Earlier quoted context omitted.

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 ba…

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 payr…

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.

Re: Lebanon’s underground cryptocurrency market

#77

Post by from »

mathgenius wrote: post #61
csomar wrote: post #34

Earlier quoted context omitted.

> 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.

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?

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...).

Re: Lebanon’s underground cryptocurrency market

#78

Post by IG_Semmelweiss »

contingencies wrote: post #16

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. Sig…

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.

Re: Lebanon’s underground cryptocurrency market

#79

Post by echopurity »

aazaa wrote: post #52

> 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…

People say this stuff as if the fiat system isn't a corrupt bomb that's constantly blowing up.

Re: Lebanon’s underground cryptocurrency market

#80

Post by splintercell »

EliRivers wrote: post #50
csomar wrote: post #37

Earlier quoted context omitted.

> 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'l…

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 :)

The article implies that almost all of this cryptocurrency is in USDT,So that argument doesn’t apply.
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