Lebanon is trying to cope with the financial crisis that created a lot of problems for the country. The country’s central bank plans to launch a new digital currency in 2021 as part of a broader effort to improve the situation. This week, the governor of the central bank Riad Salameh made an interesting comment. According to Riad Salameh, it is estimated that there are $10 billion stored inside homes. He also noted that a digital currency project launched in 2021 will help to implement a cashless financial system to enhance the flow of money locally and abroad.
It is worth mentioning that, Lebanon relies heavily on remittances from its vast global diaspora. For example, in 2019 personal remittances represented nearly 14% of the country’s gross domestic product, according to the World Bank. Interestingly, that figure was as high as 26.4% in 2004.
Based on the information provided by Salameh, the country will maintain its gold reserves as a hedge against a wider market crisis. However, if such a crisis occurs, the central bank can liquidate its bullion on foreign markets to improve the situation.
Digital currency and its importance
The country’s central bank studied digital currency since at least 2018. However, efforts appear to have accelerated earlier this year after violent protests among other issues.
Importantly, faced with a dollar crisis, banks tightened restrictions on foreign currency transactions. Moreover, a plunging Lebanese lira made it almost impossible to transact in the local currency.
Unfortunately, this summer protestors set fire to the central bank in Tripoli, to showcase their position regarding the collapse of the lira. Notably, the local currency would eventually plunge to more than 5,000 per dollar before restabilizing.
Interestingly, the growing confusion over the Lebanese lira made Bitcoin more attractive to the local population.
It is worth noting that, the political crisis is nothing new for Lebanon. Moreover, the state of the local economy is far from being ideal. In this situation, a digital currency has the potential to solve at least some of the problems. Moreover, the country’s central bank should spend more time on this project. As stated above, the local population is struggling to cope with problems.
As can be seen from the speech of the governor, the central banks understand the potential of a digital currency and its importance for the country. Furthermore, other central banks should also learn more about digital currencies.
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