According to the country’s central bank governor, Riad Salameh, Lebanon is set to debut its own Central Bank Digital Currency (CBDC) in 2021. Bloomberg, which reported on this development, cited a Lebanese state-run News Agency, noting that the Mediterranean island plans to make the paradigm shift due to transitioning to cashless networks and restoring confidence in the banking sector.
This comes as more jurisdictions begin to pay closer attention to CBDCs and the possibility of launching country-specific projects to support digital ecosystems. In fact, recent months have seen a spike in CBDC activity by local banks such as the PBoC and international bodies like the Bank of International Settlements (BIS). The latter published its first CBDC series report in collaboration with 7 major central banks.
With Lebanon set to join this bandwagon, Salameh emphasized the need to prepare for a Lebanese CBDC, per the global trends but mainly as a confidence boost to the country’s banking ecosystem. According to the central banker, implementing a CBDC will help increase cash flow efficiency both locally and internationally. Currently, this remains a challenge despite a good chunk of Lebanon’s GDP being complemented by remittances.
Salameh also highlighted that a cool $10 billion is held by Lebanese in their homes, an issue that could be attributed to the volatility of the country’s fiat currency ‘Lira.’ Earlier this year, Lebanese citizens found themselves in limbo after the currency devalued by almost 50% times compared to the dollar. At the time, they took to the streets with the sophisticated citizens opting to hedge against the Lira volatility by buying Bitcoin.
Notably, Lebanon began CBDC talks as early as 2018 but now seems to be in a more urgent position than in previous years. The country’s economy took a great hit this year, forcing local banks to cap withdrawals and increase foreign currency cash flows’ limitations. Previously, the main CBDC motivation was to curb terror financing and money laundering; this later shifted to making payment networks efficient, but now the urge seems to be a confidence boost in Lebanon’s banking sector.