In brief:
- The head of monetary operations at the central bank of Lebanon was arrested for alleged currency manipulation.
- Prior to that, the country's financial prosecutor was ordered to arrest several dozen exchange dealers.
- The Lebanon pound is plummeting since August, resulting in massive street riots.
Mazen Hamdan, the head of monetary operations at the central bank of Lebanon, was arrested for alleged currency manipulation amid the prolonged financial crisis, according to Al Jazeera’s article published on Saturday.
Currently, Lebanon continues to experience its worst economic woes in decades. For example, local banks have previously begun to impose informal capital controls and increased restrictions on foreign currency movements, forcing people to withdraw their money in Lebanese pounds at the official exchange rate—essentially reducing their savings by 40%.
According to Al Jazeera, the country’s currency has been in a constant state of decline since August. Its collapse culminated in late April with a 12% drop against the US dollar in a single day, leading to massive street riots.
After that, the central bank ordered all currency exchanges to trade dollars at the fixed rate of 3,200 Lebanese pounds. Simultaneously, authorities launched a crackdown against currency traders who exceeded that rate, as the US dollar’s price was reaching 4,200 Lebanese pounds on the black market.
This led to Lebanon’s financial prosecutor ordering the arrest of several dozen exchange dealers in recent weeks, including Mahmoud Mrad—the head of the currency exchange dealers' syndicate. Last Thursday, he also ordered to arrest Hamdan, Al Jazeera reported.
"While there have been some instances of currency manipulation, which is not unexpected when the currency peg falls apart after 22 years, the lira [Lebanese pound] is dropping primarily because there isn't sufficient dollars being pumped by the central bank or coming from overseas to lift it," Dan Azzi, an economic analyst and former CEO of Standard Charterer Bank Lebanon, told the outlet.
In a recent statement, Lebanon’s central bank has reportedly said that it is helping the investigators and disclosing its transactions with currency exchange dealers. The bank’s official also claimed that between April 8 and May 5, the institution sold $12.7 million to currency exchange dealers and bought $11.3 million, thus arguing that these amounts were not enough for the exchange drop from 2,900 Lebanese pounds for $1 to over 4,000.
As Decrypt reported earlier, increasingly more people in Lebanon are now trading and moving cryptocurrency in the wake of this economic meltdown.
"Right now, the Lebanese are interested in escaping tight restrictions on cash withdrawals and transfers. They basically want financial freedom," said Mahmoud Dgheim, who has been trading Bitcoin since 2015. "If you want to go around the banking system, Bitcoin is a solution."
Last December, Decrypt theorized that Bitcoin is pointing to the future of decentralized protest. Just over five months and one coronavirus outbreak later, many financial experts, such as Mike Novogratz, argue that Bitcoin is the future. Will they turn out to be right?