Can Cryptocurrency Solve the Lebanese Financial Crisis?
Can cryptocurrency be the solution? In October 2019, the financial sector in Lebanon began to crash due to years of corruption, mismanagement, and theft.
The economy as a whole, soon followed, and this has led Lebanon to the worst crisis since the civil war. Businesses large and small slowly began to lay off employees as the Lira depreciated and their life savings disappeared, and soon, doors began to close.
What is Causing Businesses to Shut Down?
For decades, Lebanon and the Lebanese were accustomed to a fixed exchange rate of 1500LBP/1$. Salaries, trade, exports, imports, virtually everything was done on this basis. Today, because of the shortage of physical US dollar notes, the value of the Lira is deteriorating. It has lost over 90% of its value and this has severely affected businesses. Because of the instability of the Lira, it is difficult to import products, to be able to price these products, and to be able to replenish stock. A business might buy a product at a rate of 10,000 lbp to the dollar and the next day the dollar rises to 11,000. This makes the future look unsafe and therefore, many products are no longer being imported. Less products leads to less customers, and even if they are receiving customers, the profit margins are decreasing. The less valuable the Lira becomes, the less people can afford, and eventually, very few will be able to afford products and many businesses will shut down.
What Can be Done to Fix the Problem?
There have been many propositions and ideas and solutions brought forward by people and economists. The main problem that is affecting businesses is an unstable currency and high inflation. One of many solutions is to begin exporting products internationally, which would lead to foreign currency entering the country. The problem with exporting is again, the high cost due to the weakened purchasing power of the Lira and the lack of Dollar notes. This is where local businesses that operate in shipping and exports can step in and help, by accepting payments in Lebanese pounds at a lower rate than the black market. This will negatively affect them of course, as it would affect their profit margins, but Lebanon cannot come out of this crisis without sacrifices.
More locally, businesses that do not offer delivery services should really considering offering the service. Due to the Covid situation and the extremely slow rate of vaccination, many people prefer not to go out and to order things to their house. To add to that, offering a more covid safe method of delivery can greatly boost confidence in a shop. Offering delivery services creates jobs and can increase activity of a sub economy such as a neighborhood or a certain area of the city.
Businesses can look for other local businesses for raw materials and products instead of importing them internationally if possible. If the government is not going to step in and assist the people, then we need to depend on each other. Countless people are jobless with years of experience and an eagerness to work. Look for, hire, or collaborate with local businesses and freelancers and keep the money flowing. You will not only save on costs without losing quality, but it will also stimulate buying and selling locally.
Why Businesses Should Start Accepting Cryptocurrencies
Another idea on how businesses can survive is accepting cryptocurrency payments. Besides being much more stable than the local currency, cryptocurrency can sometimes be an investment, as we have been seeing with the rise of the value of certain cryptocurrencies such as Bitcoin.
Cryptocurrencies also makes it easier for companies to accept payments from outside of Lebanon to increase exports. These cryptocurrencies can be sold and exchanged for US dollars, which is what the country is in desperate need of until reforms and changes are made.
The benefits of cryptocurrency to the country come from the fact that it is decentralized. This means that it is not controlled by one authority. For example, the money in your bank account is controlled by the bank, they can loan it out, invest with it and do as they wish, as long as when you ask for your money back, they are obliged to provide it. However, as we have seen in Lebanon, asking for your money back is like wishing for a unicorn. With cryptocurrencies, you are in full control of it and how it spent, sent, received, and sold.
Switching to cryptocurrency will provide stability for shops and businesses, as they won’t have to change prices every week, or sometimes even daily. Most cryptocurrencies, especially the widely used ones are more stable than the Lebanese Lira. Another advantage is that when people purchase products using cryptocurrency, they are also giving you an investment. Recently, popular cryptos such as bitcoin, Ethereum, ripple, and many more have seen an increase in prices. As a business owner, being paid in cryptos is like being given an investment to a certain extent. And with the expected growth of some cryptos such as bitcoin to reach up to $150,000 per coin, lots of profits can be made.
Everyone is struggling and going through the same problems, and while we may be angry at businesses for selling products are ridiculous prices, we have to remember that they have responsibilities as well and that they are not responsible for the huge increase of the price of products. But with that being said, businesses could improve on some things to help stay afloat and survive the crisis.
You can help as well, Watani initiative vendors will be paid in fresh dollars for every purchase you make, check it out.
