Lebanon’s central bank plans to launch a new digital currency in 2021 as part of a broader effort to tackle the parallel economic and financial crisis that has gripped the country.

Lebanese Governor Riad Salameh said at a rally on Monday: “We need to prepare for the Lebanese digital currency project” to increase confidence in the banking system.

“With regard to the money supply in the Lebanese market, an estimated $ 10 billion is stored in homes,” Salameh was quoted by the official National News Agency.

The central bank added that the digital currency project, launched in 2021, will help introduce a cashless financial system to increase the flow of funds locally and abroad.

Lebanon is heavily dependent on remittances from the vast global diaspora. Personal transfers accounted for almost 14% of Lebanon’s GDP in 2019, according to the World Bank. In 2004, this figure was 26.4%.

Salameh says Lebanon will keep its gold reserves to hedge against a major market crisis. In the event of such a crisis, the central bank can liquidate its bullion in foreign markets for immediate relief.

Banque du Liban, the country’s central bank, has been thinking about a government digital currency since at least 2018. Efforts appear to have been accelerated earlier this year following violent protests and quiet banking operations that brought the Lebanese financial system to a standstill. …

In the face of the dollar crisis, banks have tightened restrictions on foreign exchange transactions, and at least one major institution has limited withdrawals to $ 400 a month. The fall of the Lebanese pound made trading in the local currency almost impossible.

In June, protesters set fire to the central bank in Tripoli in anger over the collapse of the lira, which has long been pegged to $ 1,500. Until stabilization recovers, the lira will eventually fall to more than £ 5,000 per dollar.

The growing confusion over Lebanese banknotes has led to a spate of bitcoin purchases among locals as peer-to-peer markets such as Localbitcoins saw increased activity.

Political chaos is nothing new to Lebanon. The small Mediterranean country has struggled to form an identity after a 15-year civil war. The sectarian power-sharing system governed by feudal elites made the country extremely difficult to govern, even in times of relative calm.

Source: CoinTelegraph