The Bank of Lebanon, the country’s central bank, has issued a bitcoin warning, the first such warning in the region. The warning was issued on 19th December 2013 and outlines a number of risks associated with digital currencies, many of which we are all too familiar with.
The Bank warns of several risks:
- Transactions made through unregulated networks cannot be guaranteed and losses cannot be recovered.
- Unauthorized and incorrect transactions using digital currencies are irreversible.
- The highly speculative nature of digital currencies and the fact that they are not guaranteed by any central bank makes them very volatile.
- Digital currencies can be used for criminal activities, including money laundering and terrorism.
Since Lebanon is in a rather tough neighbourhood, the terror warning makes sense, which can’t be said of similar warnings issued in many other jurisdictions.
The bank continued, stating that:
“As a result, and to avoid dangers and losses that might result from using e-money, the central bank of Lebanon warns against purchasing, keeping or using e-money.”
Although Lebanon tends to end up in the news for all the wrong reasons, the picturesque Middle Eastern country has a vibrant economy and an impressive banking system, with more than a hundred different banks.
With a huge diaspora in Europe and the US, Lebanon also gets billions in remittances every year. In 2012 the volume of remittances stood at $7.57bn and it was second only to Egypt in the MENA region. It was substantially higher than the inflow remittances to several much bigger countries like Syria, Algeria, Iraq and Jordan.
Remittances account for roughly one fifth of Lebanon’s nominal GDP. With that in mind it is easy to see why bankers may be anything but enthusiastic about the prospect of a cheaper, unregulated payment network competing with traditional wire transfers.
The notice points out that issuance and use of “e-money” is prohibited under a decree issued in 2000.
The notice is issued for financial institutions and exchange institutions, so it prohibits the use of bitcoin by financial institutions in the country. As for private citizens, the situation is not as clear.