Lebanon’s central bank Banque Du Liban plans to launch a new digital currency in 2021 to combat a parallel economic and financial crisis that has engulfed the country.
Riad Salameh, the Governor of the central bank, said:
“We must prepare a Lebanese digital currency project as a way to shore up confidence in the banking system.”
According to the state-run National News Agency, Salameh said:
“As for the monetary supply in the Lebanese market, it is estimated that there are $10 billion stored inside homes.”
It has been reported that the central banker added that a digital currency project launched in 2021 will help implement a cashless financial system to enhance the flow of money locally and abroad.
However, according to the World Bank, Lebanon relies heavily on remittances from its vast global diaspora.
In 2019, personal remittances represented nearly 14% of Lebanese gross domestic product. That figure was as high as 26.4% in 2004.
Salameh said that Lebanon will maintain its gold reserves as a hedge against a wider market crisis. If such a crisis occurs, the central bank can liquidate its bullion on foreign markets for immediate relief.
Will a central bank digital currency provide stability to Lebanon's fractured financial system? https://t.co/tnraB7S6UZ — Cointelegraph (@Cointelegraph) November 10, 2020
Likewise, the central bank has been kicking around the idea of a state-run digital currency since at least 2018, as efforts appear to have accelerated earlier this year after violent protests and silent bank runs brought Lebanon’s financial system to a halt.
Faced with a dollar crisis, banks tightened restrictions on foreign currency transactions, with at least one major institution limiting withdrawals to just $400 a month.
Thus, a plunging Lebanese lira made it almost impossible to transact in the local currency.