It was a warm May evening in Jbeil, a coastal city just north of Beirut, and one of Lebanon’s new cryptocurrency dons was getting his nails done. Mario Awad sprawled on a couch in his plush apartment, his phone sounding off constantly in his free hand while the manicurist hunched over the other, buffing, dipping, and polishing. The calls and messages came from clients looking to buy a cryptocurrency stablecoin called Tether (USDT), of which Awad is one of the main suppliers in Lebanon.

When the manicurist was done, Awad opened a drawer and handed her a fresh 100,000 Lebanese pound note. Then he leaned back on his couch while a bodyguard let her out and turned back to his ever-busy phone.

Over the last two years, Lebanon has been gripped by an economic death spiral, the culmination of years of government corruption and mismanagement. The electricity supply has collapsed, pharmacies and gas stations are empty, and the Lebanese pound has lost more than 90% of its value. In early 2019, the 100,000 pound note that Awad gave to the manicurist was worth around $66. On the day he handed it over, it was worth $8. Savings, pensions, and salaries have evaporated, and much of the country’s previously affluent middle class has found itself struggling to pay basic bills. The many people who were already poor are now struggling to afford food. The monthly minimum wage in Lebanon is now the equivalent of just $33.

Lebanon is a country that knows crises and, to some extent, prides itself on weathering them. But it’s difficult to overstate the depth and breadth of this one. A U.N. report said that in spring 2021, an estimated 78% of the population had sunk below the poverty line. The World Bank has said that Lebanon’s decline is “likely to rank in the top 10, possibly top 3, most severe crises episodes globally since the mid-nineteenth century.”

“People were dealing small numbers, but I made the volcano in Lebanon.”

The financial crisis has led to a spike in cryptocurrency usage in Lebanon, both as a means of recovering savings through speculative trading and as a way to circumvent a broken banking system. Due to domestic bank restrictions and international sanctions, Lebanese bank accounts and credit cards have been rendered effectively useless for making purchases outside of the country, including buying cryptocurrency on international exchanges. That’s where Awad comes in. Over-the-counter (OTC) suppliers like him are part of a complex and legally murky ecosystem through which cryptocurrency is purchased abroad, sent to Lebanon, and then distributed through a network of dealers to be sold to clients in exchange for hard cash. 

Before 2020, Awad said cryptocurrency investing was uncommon in Lebanon, held back by a general lack of awareness as well as a dysfunctional electric grid and slow internet speeds. But the country has a high degree of tech literacy and talented developers. So when the crisis hit, there was already a small community of crypto-enthusiasts ready to spring into action. Media attention and a well-established Lebanese penchant for hustle meant the market quickly expanded. Awad also personally claims at least some of the credit for catalyzing the Lebanese crypto-trading community here. “People were dealing small numbers,” he said. “But I made the volcano in Lebanon.”

Accurate data on the overall volume of cryptocurrency trading in Lebanon is all but impossible to obtain, due to the informality of the market. Demand fluctuates with the rise and fall of the global cryptocurrency market, but OTC suppliers estimated trading volumes across Lebanon of up to 10 million dollars per week at high points. Fabien Tabarly, the Lebanon-based CEO of Nigma, a security consulting firm specializing in blockchain forensics, says that there is a large and “totally illegal” OTC market in the country. But the only Lebanese legislation that might specifically cover the use of cryptocurrency is worded vaguely and could be interpreted in conflicting ways. It prohibits “financial institutions” from dealing with cryptocurrency, but OTC dealers argue that they are not institutions and therefore are exempt.

Lebanon’s banking sector was once hailed as a paragon of stability and success in the Middle East. Riad Salameh, the award-winning governor of the central bank since 1993, presided over a network of institutions that brought billions of dollars into the Lebanese economy by offering extremely competitive interest rates and a high level of banking secrecy, which made it an attractive destination for offshore assets, alongside places like Luxembourg and Switzerland. 

But those dollars entered an economy that produced very little. In the decades since the Lebanese civil war ended in 1990, Lebanon’s greatest export has been its own citizens: Educated Lebanese, finding little opportunity in their own country, have been going abroad, earning money, and sending much of it back to their families via Western Union or bank transfers to Lebanese accounts that offered interest rates as high as 15%. Meanwhile, the debt held by both the central bank and the state was serviced by further borrowing. Salamé’s financial engineering had effectively turned the Lebanese economy into what some labeled a giant Ponzi scheme, which needed a constant supply of fresh dollars to keep running. 

In October 2019, outrage at decades of entrenched corruption and the government’s failure to provide the most basic of public services exploded into massive street protests, which briefly looked like the beginnings of a full-scale revolution. The government resigned, foreign aid was withheld, remittances dried up, and the whole shaky fiscal edifice that was the Lebanese economy came apart at the seams. 

That’s when Lebanon’s cryptocurrency market took off, along with the OTC system run by traders like Awad. The OTC ecosystem here largely operates using Tether, a cryptocurrency pegged to the U.S. dollar and therefore subject to fewer price fluctuations. The process works like this: A client who wants to buy cryptocurrency will usually open a wallet on an exchange (the most popular in Lebanon being Binance) and then meet with an OTC dealer to hand over cash dollars. The dealer will send the same amount of Tether — minus a commission ranging from 0.5%–5% — to their account via a peer-to-peer transaction. The client can then pursue whatever crypto-investment strategy they see fit with the USDT in their digital wallets. 

Sellers, in turn, use the hard cash they are taking in to buy from larger Tether suppliers in a chain that stretches outside of Lebanon. 

When demand in Lebanon is low, the OTC ecosystem is fueled by cryptocurrency sent from abroad in smaller amounts by diaspora or personal connections. However, during times of high demand — usually driven by a bullish global crypto-market — larger amounts of Tether have to be sourced. According to multiple OTC dealers who spoke to Rest of World, China, Ukraine, and Turkey have all been major sources of Tether.

But the most recent major source has been Nigeria. The country has a well-established Lebanese diaspora, and, for years, large amounts of money have flowed from Nigeria to Lebanon, the proceeds of both legitimate and illicit business ventures. Cryptocurrency provides an ideal way for “clean” money to move with lower fees and shorter time frames and for “dirty” money to avoid sanctions and regulatory scrutiny. 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.

Sellers say that the the top of this chain is dominated by a few individuals, both because of the high degree of cash liquidity required and, according to one mid-lever supplier who requested anonymity to speak freely, the risk involved. “In Lebanon, those amounts of money come with danger. They need protection from high-up people,” they said.

Nonetheless, for everyday OTC customers in Lebanon, the process of buying into the market is relatively straightforward, even mundane, and clients come from all walks of life. Mohamed Noureddine was a 27-year-old master’s student studying molecular biology in Beirut when the financial collapse happened. Even before, he knew that things would be tough after graduation. “Prices were always inflated. With an entry-level salary, it was just enough to pay your rent,” he told Rest of World. “You still needed a lot of support from your family.” 

Then, on August 4, 2020, more than 2.5 thousand tons of ammonium nitrate poorly stored in the Port of Beirut was detonated by a fire, devastating swathes of the city. For Noureddine, who plans to soon resettle in the U.S., it was a breaking point. He stood in the street among his bleeding and stunned neighbors and looked up at the noxious red mushroom cloud towering over the city. “The explosion was a pivotal moment in deciding to leave,” he explained. “Looking back, I knew it wasn’t safe to live here, but it took the explosion to confirm it. I’ve lived abroad before, so I see the lack of human value here. There’s no accountability in this country.”

That’s when Noureddine started dabbling in cryptocurrency, hoping to make some money with speculative trading. “The jobs I was looking at at the time were paying an effective monthly salary of $100, and I saw the option of something that could sustain me until I could get out,” he said. “And with crypto, there’s the idea of self-custody. It guarantees you’re the sole owner, and, during the crisis, we saw that your bank balance was just numbers on a screen.”

It’s a sentiment that was expressed time and again by other people in Lebanon. On a recent afternoon, an OTC dealer sitting on a sunny café terrace in Beirut met with an 18-year-old named Michel and his 60-year-old father, Joe, who both requested we use only their first names to speak freely. Joe told Rest of World that he didn’t know much about how cryptocurrency worked but was sure of one thing: “It’s better than the banks; it’s definitely better than the banks.” Asked about his profession, he replied, “I work in a bank.”

For OTC traders, the market has become a lucrative way to advance in an otherwise stagnant economy. Less than a year ago, 30-year-old Rani Baasiri was cooking in restaurants in the upscale Beirut neighborhood of Badaro and doing some speculative crypto trading on the side. Now, the suave 30-year-old, who goes by the nickname “Gravity” in Lebanese crypto circles, is one of the biggest and fastest-growing OTC suppliers in the country. During busy periods, he can earn many times his annual chef’s salary in a single day. Even Awad, who does everything with an air of studied indifference, gives a reluctant nod of admiration at the mention of Baasiri’s name: “He’s ambitious, that guy.”

Baasiri made his name by undercutting the approximately 5% commission that suppliers were typically charging. It was a move that wasn’t popular among his peers. “That’s my reputation,” Baasiri said. “Gravity fucks the market.” Baasiri, who said he was left in an orphanage at the age of 5, is proud of his success but carries it modestly. “I made my life,” he told Rest of World. “Respect is the first rule I have; money is nothing.”

Nader Dirany, who claims to be one of the first OTC dealers in Lebanon, quit a well-paid job as a project manager to open Lebanon’s first dedicated OTC office in the deprived Beirut suburb of Chiyah in 2020. The office is minimally decorated and thoroughly air conditioned, a bubble of good order amid the chaotic streets that surround it. Dirany is a believer in the technology underlying cryptocurrency, if not some of the coins themselves. “I like Bitcoin, it has a story. But it’s a super-fad. It does nothing: high fees, slow transactions. The blockchain though is really revolutionary,” he explained.

“Using USDT is not like actually using crypto. It’s more like a money transfer. A payment method, not a store of value.”

Dirany sees the cryptocurrency market in Lebanon as having two distinct functions. Some people are using it to preserve or recover the value of their capital, while others are simply moving money from one place to another. “Using USDT is not like actually using crypto. It’s more like a money transfer. A payment method, not a store of value,” Dirany said.

While cryptocurrency is providing a financial lifeline for some in Lebanon, it is by no means a story of universal success. Marcel Younes, a pharmacist by profession and a cheerfully dedicated free marketeer, runs Bitcoin du Liban, a site dedicated to educating people who want to invest in cryptocurrency. Speaking just prior to the May 2021 global crypto price crash, Younes said, “Recently there’s been a lot of speculative investors because of the hype. It’s very hard to keep the focus on education. People always join in a bull market; they join the hype train, and most of them are losing money at the moment.” 

After taking a hit on his investments in September 2020, Noureddine used risky leveraged coins to make back his losses. “But then I got greedy,” he said. In one day, he watched a $2,000 investment fall to $700, when he cut his losses. “I didn’t sleep that night. In Lebanon, that’s a lot of money to lose.” It was a tough lesson to learn. “I thought, why am I doing this to myself? The profits I’m making from one day of watching charts I could lose in one hour. I realized I didn’t want to be that nervous, looking at my phone all day.”

Beyond investment tools, Younes said he thinks cryptocurrencies could serve a wider purpose in Lebanon. “Eventually,” he says, “it will create a parallel economy, and the government will have two choices: fight it or join it.” The anarchic idealism of Bitcoin believers around the world resonates especially here, where many are seeking any opportunity to escape from corrupt power structures. Despite Younes’ optimism, Lebanon’s precipitous decline means that the potential role of cryptocurrencies in its future remains obscure. In August of this year, for example, power cuts became so severe that hundreds of thousands of people were left without the internet, the most basic requirement for dealing with crypto. The OTC market, however useful, is clearly not a solution for an economy in shambles. 

Asked what impact OTC suppliers like him could have in a country that is floundering in crisis, Awad said, “I don’t know what’s happening outside, and I don’t care.” Dirany maintains his oasis of air conditioning and record keeping, from where he told Rest of World, “The monster has too firm a grip in Lebanon We can’t take anything out of their hands that will really affect them.” 

Despite the success that Baasiri has wrung out of Lebanon’s collapse, he also knows he will not find the future he wants here. “I can see my life changing, but in my heart, I don’t feel anything. I want to go to a country that respects people, like Canada,” he said

Even Younes, the believer, had no rosy illusions about the future. “Oh this is just the beginning! It’s going to be poverty, crime, general chaos.” He smiled and laughed. “The usual stuff!”