The economies of Lebanon and Turkey have been hit hard by inflation and currency devaluation in recent years, with prices skyrocketing. A cup of coffee at Starbucks, for example, went from 5,000 Lira to 380,000 Lira, and a short Uber ride costs 500,000 Lira. Businesses have struggled to keep up with the fluctuations in currency value, with some opting to price their goods and services in US dollars. In this article, we examine how citizens of these countries can turn to cryptocurrencies, as a potential solution to their financial woes.
Current situation in Lebanon and Turkey
The lira has been facing extreme depreciation, hitting record lows against the US dollar. The Turkish lira has lost 80% of its value since 2018 and has fallen 20% so far this year alone. The Lebanese Lira has lost 98% of its value overall.
As access to hard currency becomes restricted, many Turks and Lebanese are turning to more stable options to preserve their wealth amid sky-high inflation. However, this increase has made buying dollars and gold more difficult, leading people to find alternatives.
Dollarization refers to the widespread use of the US dollar alongside or instead of the lira as the country's currency. This practice has become increasingly common due to the devaluation of the lira and economic instability in the country.
Businesses often price their goods and services in US dollars, and many people receive salaries in both currencies. It has made it easier for those with access to dollars to maintain their standard of living, but it has also made life more difficult for those who rely solely on the lira.
Impact on Economy and Society
The current shift towards stable currencies has had a significant impact on the economies and societies of Lebanon and Turkey, leading to widespread financial instability and economic hardship for many people.
Many have lost faith in the government and the lira, and some have lost their life savings due to the collapse of the banking system. Millions have been unable to access their money since then and this is not a new problem.
While some are hopeful that people will take action to remove corrupt officials from the government and bring about positive change, others are exploring alternative options, such as using cryptocurrency or leaving the country altogether.
How Can Cryptocurrency Help
Turkish and Lebanese investors are turning to cryptocurrencies, particularly stablecoins, as a refuge amid extreme currency instability and capital controls. Dollar-pegged stablecoins, in particular, are among the most sought-after by citizens.
Several alternatives to full dollarization, such as introducing a new currency pegged to the US dollar or using blockchain technology to create stablecoins, can be used to store value during times of crisis like today.
The Internet Computer's potential ability to create its own native decentralized, crypto-backed stablecoin could be particularly appealing to citizens of countries such as Lebanon and Turkey as it could potentially provide another option for those seeking to protect their wealth.
The increasing demand for stability in Turkey and Lebanon highlights the crucial role of stable cryptocurrencies as a refuge during times of extreme currency instability and capital controls. Cryptocurrencies are now seen as more than just a speculative investment and are considered life-saving when national currencies continue to depreciate.
Given the potential benefits of stablecoins, particularly in countries facing economic turmoil, the Internet Computer's ability to create its own crypto-backed stablecoin could be an appealing option for those seeking to protect their wealth during times of crisis.
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