In a shocking effort to combat its increasingly dire economic crisis, the Syrian government is poised to legalize Bitcoin and other digital currencies. According to the Syrian Economics Research Center (SERC), digital currencies may be able to stabilize the economy, control inflation, and attract much-needed global investment.
Nearly two decades of conflict and financial devastation have severely devastated Syria’s economy. The gross domestic product has collapsed by over 60%, and even the value of Syria’s pound has been severely eroded. Few Syrians can again rely on banks to hold their money, and the current rampant inflation even cancels savings accounts. Now, SERC is proposing Bitcoin as an opportunity to restart.
Making Bitcoin Legal would give people in Syria a plan to be able to trade, mine, and use Bitcoins to conduct day-to-day activities. The government could regulate this with the Central Bank of Syria and use it as an alternative method for restoring confidence in other financial systems apart from banks.
The key to the new plan will be introducing a digital currency version of the Syrian pound, backed by hard assets like gold, U.S. dollars, or Bitcoin. These could provide stable value for their new electronic cousin, making electronic financial transfers more secure than they otherwise might have been.
A digital economy will make it easier for Syrians to shop online, and also easier for Syrians living abroad to remit money home. The strategy also includes exploiting Syria’s unused energy resources for Bitcoin mining, potentially creating a new source of income.
This idea is fascinating, but significant challenges remain. International sanctions have effectively excluded Syria from the international financial system, and no sufficient infrastructure and expertise exists to fully integrate cryptocurrencies. Despite all of these obstacles, SERC feels that the strength of the Syrian people will somehow make it through.
Bitcoin is decentralized; it doesn’t rely on banks or conventional financial systems, so it becomes a potential channel for Syria to bypass sanctions. Other countries have used Bitcoin to attract international investments and Syria could emulate them.
On the other hand, regulation on the use of Bitcoin will not be easy as some are apprehensive that it could fall into the hands of groups out of the government’s control. It will therefore raise questions over how well the system can be monitored.
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