Lebanon's Crypto Market Grows 10% Amid Economic Collapse

Lebanon's regulatory stance on cryptocurrencies remains ambiguous, with neither formal recognition nor outright prohibition. The Banque du Liban (BDL) has imposed a ban on banks handling cryptocurrency transactions, but this restriction does not apply to peer-to-peer trading. Consequently, most cryptocurrency activities occur informally, often facilitated through over-the-counter (OTC) markets or Telegram groups, where USDT is commonly used as a hedge against the collapsed Lebanese pound.

Despite warnings from the central bank about the risks associated with cryptocurrencies, the economic despair in Lebanon has driven widespread adoption. The lack of clear taxation and anti-money laundering (AML) rules creates a high-risk environment for users. However, there are ongoing discussions about potential regulations, largely influenced by pressure from the International Monetary Fund (IMF) and the increasing reliance on cryptocurrencies within the country.

Historically, Lebanon's relationship with cryptocurrency has been shaped by economic crises rather than proactive policy-making. In 2013, the BDL instituted a ban on crypto transactions, reflecting global skepticism at the time. The 2019 financial meltdown, which saw the Lebanese pound lose over 90% of its value, marked a turning point. Citizens increasingly turned to peer-to-peer crypto markets, particularly for dollar-pegged stablecoins like USDT, as a means of preserving their savings and facilitating remittances.

By 2024-2025, while no formal legalization of cryptocurrencies had occurred, agencies adopted a practical tolerance towards crypto operations, recognizing their necessity for remittances and savings preservation. This unofficial but critical lifeline within the economy highlights the fragmented and restrictive nature of Lebanon's cryptocurrency management landscape.

The regulatory framework is overseen by two primary institutions: the Banque du Liban (BDL) and the Banking Control Commission (BCC). The BDL maintains its 2013 prohibition on crypto transactions involving banks, while the BCC monitors informal cryptocurrency operations but lacks enforcement capacity. The legal landscape is characterized by regulatory ambiguity, with no specific crypto laws, a thriving informal peer-to-peer market, and the dominance of stablecoins like USDT in trading volumes. The absence of a licensing system for exchanges or wallet providers further complicates the situation, pushing cryptocurrency activities underground.

Lebanon's crypto policies are contradictory, with an officially restrictive stance but practical permissiveness due to economic collapse. The BDL's banking ban on crypto transactions blocks formal exchanges, but the lack of KYC/AML rules for peer-to-peer trading creates an unregulated shadow market. Taxation remains unclear, with crypto assets treated like foreign holdings, avoiding explicit tax liability. Capital controls, which limit monthly withdrawals to $400, force users into risky OTC trades. Despite the BDL's warnings, the policies fail to curb adoption as citizens prioritize financial survival over compliance.

The key impacts of this regulatory environment include banks being frozen out of the crypto economy, tax ambiguity benefiting users in the short term, and dollarized stablecoins like USDT becoming essential for financial transactions. The absence of formal support has led to the development of a crypto ecosystem driven by necessity rather than innovation policy. Community-led solutions, such as Telegram groups and face-to-face peer-to-peer networks, handle most crypto trades, with USDT serving as Lebanon's unofficial digital dollar.

Cryptocurrencies are primarily used for hedging against inflation and sending remittances abroad, with limited speculation due to liquidity constraints. The structural limitations, including the lack of regulatory sandboxes or startup incubators and banking isolation, prevent institutional participation. The BDL's focus on stabilizing the collapsed pound has created a vacuum where crypto operates as a parallel financial system—unregulated but indispensable. This bottom-up model demonstrates how populations can self-organize monetary solutions during state failure, albeit with heightened risks of fraud and volatility exposure.

Despite some semblance of formality, Lebanon's crypto market faces serious structural impediments. Banking isolation forces risky cash-only trades, and the lack of consumer protections against scams and hacks poses significant risks. Legal uncertainty blocks institutional investment, and extreme USDT premiums due to dollar shortages further complicate the situation. Capital controls restrict fiat access, limiting the chances of cryptocurrencies becoming real financial alternatives. The lack of formal regulatory reform will prevent any maturity beyond this highly risky state.

Looking ahead, Lebanon's cryptocurrency landscape may undergo transformation amid growing regulatory pressures. The IMF could push for crypto oversight as part of financial reforms, while OTC markets for USDT/LBP trades continue to expand to meet dollar demand. A possible licensing framework by 2026-2027 could formalize exchanges, though banking restrictions may persist. The market is projected to generate $7.0 million in revenue in 2025, rising to $7.3 million by 2026, with 430,800 users expected by 2026. However, the central bank's resistance and economic fragility create uncertainty, leaving Lebanon's crypto future balanced between formal regulation and informal necessity.

In conclusion, the crypto market in Lebanon is growing out of necessity rather than through a system of law or policy implementations. While there is IMF pressure for regulation, banking restrictions and BDL skepticism are likely to maintain these currencies mainly as informal lifelines rather than a structured financial solution. Users are left vulnerable yet resourceful, considering the scenario of economic collapse.