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Lebanon banks freeze accounts in Financial Crisis – Proof of Keys Event is Necessary

An older story that should get more focus due to its relevancy, the country of Lebanon is currently undergoing a financial crisis. Let’s take a minute to discuss how Lebanon got here, what’s in store, and why the Proof of Keys event that happens every year is so important.

Nothing should be considered investment or financial advice. Enjoy the ride.

Lebanon Financial Problems

Most people in the U.S are unfamiliar with the country of Lebanon, let alone some of the problems going on in the country. The country not to long ago was actually in a civil war. This was as recent as 1990 which does not leave it much time to recover and take advantage of the current economic growth in the world.

After the civil war and following unrest, the country started to accumulate an enormous amount of public debt from borrowing externally. This obviously has contributed greatly to its current predicament of financial problems.

Banks Freeze Funds

The new government clearly had to acquire additional funding some how to accelerate the economy and spending, so their solution was borrowing. Like all good things, the borrowing slowed to a halt and the inflow of capital stopped in late 2019, leading to a massive economic freeze. Shortly after, banks started issuing similar statements to the one posted on Reddit which is below.

These statements basically depict the scenario where banks are telling customers their funds are frozen and no longer available to them. In essence, the people are losing their money now due to the poor economic management of the government.

Financial Crisis in Lebanon. All Banks Have Been Issuing Similar Statements (Image Auto Translated from Arabic) from CryptoCurrency

The English version loosly translated by a Reddit user:

SGBL Root, October 31, 2019 Distinguished Clients of SGBL Temporary suspension of facilities Subject After Greetings, Referring to the above-mentioned subject, and in line with our telephone call to you during the past days on the same subject, We inform you under the present book (1) The administration of SGBL decided – in the light of the economic, political and security conditions experienced by Lebanon – Suspend temporarily and without prejudice to the banking facilities (of all types) previously granted to you, pursuant to Contractual and legal provisions in force in this regard. (2) Therefore, you are kindly requested to take note of the above and to take action until a contrary decision is communicated to you from our bank. To this area Hoping to meet you and your response, and hope to accept the most respect. Societe Generale Link in Lebanon included. Sonset is a general in Lebanon A high-opinion builder of the company, 0 21.00.0. By the board of a rack number 1۶, the irrigation sign 1918 Half 1274 13 1

–ThinCrusts, Reddit User

Normally, I would never rely on a Reddit user for content information or facts. Due to the fact that I have no understanding of the language of the note, I have no choice. Let’s all take it with a grain of salt and just focus on the message of the overall note.

Solution to the Financial Crisis

While their is no clear solution to countries over leveraging their GDP against borrowing money year over year, there is a solution for the customers who are now basically broke. Do not give the banks all of your money, and definitely do not leave it in there unattended. The second the economy started to turn, each person should have been withdrawing or investing in commodities to protect their wealth and hedge against the unstable economy.

Lebanon made a huge gamble. They hoped the funding (borrowing) would propel the economy into new growth and development to offset the continually growing hole they were putting themselves in. Sadly, that gamble did not go the way they planned. My first question to this was, then who was responsible for the customers who can not access their money? Unless there is a substantial bailout for the insolvent banks that hold over 50% of Lebanon’s portfolio, no one.

Proof of Keys Importance

First off, we need a solution to companies and banks, leveraging their assets to create debt, credit and loans. These are the financial instruments that slowly grow to unmanageable levels of capital and create financial problems in economic downturns.

The crypto community has thought of a way to combat the growing influence of exchanges and custodial solutions in the industry that could end up doing the same thing that these banks did.

Therefore, in order to combat the feeling of security these entities have from holding billions of dollars day after day with no urgency to give the money back to the holders, the Proof of Keys event was born. The Proof of Keys event is executed on January 3 of every year, and it is a day where everyone across the industry withdraws their crypto from exchange and custodial solutions.

This forces the entities holding the assets to always be liquid and not over leverage their book to produce loans, credit and take on too much debt. The idea is one that is fairly simple, but extremely effective if done at scale. For these reasons, this event is extremely important for the crypto industry. It is done in order to protect not only the users from losing their assets, but the entities responsible for holding these assets from operating without sufficient checks and balances from the greater community.

The post Lebanon banks freeze accounts in Financial Crisis – Proof of Keys Event is Necessary appeared first on San Francisco Tribe.

This post first appeared on Blockchain, please read the originial post: here

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Lebanon banks freeze accounts in Financial Crisis – Proof of Keys Event is Necessary


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