Think of it as a remmitance system, relatives overseas send money to family in lebanon in bitcoin, these individuals but it off them for cash, they also sell bitcoin to anyone who liquidates local assets for cash and wants to gtfo of Lebanon. Crypto is basically keeping the market somewhat liquid at this point.

> it was not clear from the article what happens to the lebanese cash that was used to purchase USDT

They are purchasing using hard cash (ie USD) outside Lebanon and then transferred there. The article is a bit confusing but this is the key bit:

An agent in Nigeria will collate these sums, buy USDT, and send it to one of the top-level suppliers in Lebanon. Once they have sold it on, they will disburse cash to the originally intended recipient of the remittance.

It's a way to transfer USD (value) to your family in Lebanon. The dealer in Lebanon gets Tether (from the agent in Nigera), and gives cash USD to the family in Lebanon, minus their commission.

The Lebanese pound is never used.

Is crypto involved in any way, or is it just USDT, a centralized USD token, on centralized exchanges?

I guess the agent probably has to buy bitcoin and exit if on some dollar offramp to get actual USD to give the family.

USDT is hosted on Ethereum. The value of the USDT coin does not come from cryptocurrency as you've correctly pointed out, it comes from centralized authority backing USDT. But what part does come from cryptocurrency is the decentralized tracking of account balances. If it were't for the Ethereum blockchain, the only alternative would be to get physical USD into the country or for a Lebanese individual to open up a bank account denominated in USD (which is most likely illegal and impossible). So crypto is actually part of the solution here. Hope that makes sense

its not illegal or impossible to open a USD bank account for the lebanese. In fact, its extremely common.

The problem is that now it just extremely risky

Most of the upper class has the USD denominated savings effectively kidnapped by their bank institution. Those funds are frozen or very highly capped (only say $200 $USD draw per week). No one can take them out in large chunks. It is extremely difficult to make payroll for staff (many companies paid payroll in USD instead of lira before the crisis).

You can use USD deposits to buy assets or cancel debt though. As long as the receiver / beneficiary of your money another lebanese bank. So, you can pay your debts, or transfer your money to someone else in lebanon. But you can't take physical dollars out for the same purpose.

There is also the concept of "fresh money" by which the bank will let you take out any money that you have recently received from abroad. That's what is making everyday living bearable for a lot of lebanese

Thanks for providing some nuance on the banking accounts. It's helpful to be able to compare crypto's impact (which I still think is substantial) against a realistic situation instead of the "centralized strawmen" that seem so common in crypto arguments.

It's worth noting that this - and other non-crypto remittance schemes - rely on the end exchange agent having access to large amounts of physical US cash.

This article doesn't go into where that comes from, but it's not unusual for criminal gangs to launder money this way. The agent themselves might not be a criminal, but they take often use the cash supplies from one and transfer back the value somewhere else (via a legitimate business) less a commission.

Tether is on record as censoring transactions (remember the Poly Network fiasco?). They are clearly centrally controlled despite being a token on the Ethereum network.

Whether they should have censored transactions in that instance is irrelevant. The fact remains that the coin does not belong to it's holders.

> Someone must be left holding the bag, there must be some FX liquidity that they tap into?

You must have missed that 1. Lebanon is very corrupt and 2. there is an official exchange rate. Someone is making a killing selling on the black market and buying with the official rate.

Yes, this is the interesting part of the story. I was just wondering how it works exactly. Is there a black market lebanese pound / USD? There is no mention of this in the article. Or do they use some kind of offical lebanese pound / USD exchange? If so how does that work, can you just show up at some office somewhere with local currency and get USD?

Lebanese reserves of USD and other hard currencies are rapidly dwindling and going LBP -> USD at the official rate is now only permitted for "essential imports." Essentially the central bank will allow you to convert your LBP for USD at the preferred rate only if you are using those dollars to import things like medicines. Of course since Lebanon is incredibly corrupt there are probably people who are "importers" who overstate their imports so they can get more dollars and arbitrage the difference between the rates. Ordinary people can only convert only small amounts of LBP at local banks at a worse-than-official rate so they go to the "black market" which is basically just a bunch of street vendors and guys organizing on WhatsApp (https://www.aljazeera.com/economy/2020/5/29/like-a-drug-deal...).

You are confused (though your username is mathgenius haha). The guy in the article is exactly doing that. He is the black market for Lebanese pound / USD (in this case USDT).

Obviously, he'll need to run a full circle (back from Lebanese pound to USD) to refuel his reserves. In some countries where I have seen this, this is usually done through companies which have some license to buy USD at the government exchange rate to import stuff. Stuff is imported from offshore companies run by these same guys who will sell this product at some crazy markup (usually 100%) and then this profit is dumped through guys like in the article. Rinse and repeat.

Yes, there is.

Its about 18,000 to 1 USD, at the moment.

It was 1,500 back in Sept 2019, and as the article states, it was at this rate since the 70s.

Source: https://lirarate.org/

If I were to summarize the Greek situation it is a story about two countries that hate each other but share the same currency. Unfortunately there is no more nuance to be had. It really is that simple.

What a terrible, and dare I say, wrong summary. It's more like politicians staying on irrational positions because changing it would mean things like political suicide (by low-information populist voter outrage)/admission of being wrong.