Ask a Lebanese freelancer how a client abroad pays, or a shopkeeper how a sale is priced, and the conversation returns to dollars. Since the 2019 financial crisis, banking failure and the currency’s collapse have deepened Lebanon’s reliance on cash dollars.
Dollar stablecoins could extend that reliance into digital form. Stablecoins may ease payments for people and businesses that cannot depend on Lebanese banks. But they could also deepen dollarisation, weaken domestic financial intermediation and move payment infrastructure onto foreign private networks.
Lebanon therefore offers an important test: what happens when private digital dollars reach an economy that is already dollarised, distrusts its banks and has limited control over the cross-border infrastructure its residents may use?
Payment relief is not financial reform
Most activity in stablecoins remains tied to crypto markets rather than retail payments. Under a niche-adoption scenario, Bank for International Settlements research identifies Lebanon as one of several crisis-hit economies where pockets of dollar-stablecoin holdings could emerge, while everyday use remains limited.
The clearest potential benefit is narrow but practical. Stablecoins could reduce friction in cross-border payments and transfers. Even at limited scale, they become policy-relevant if households and businesses use them to receive, hold or transfer dollar value outside banks. This is functional substitution: stablecoins begin replacing specific banking functions before becoming widely used.
But payment relief is not financial reform. Stablecoins cannot recapitalise banks, restore trapped deposits or determine how Lebanon’s losses should be allocated. A token can move value; it cannot repair a failed balance sheet. The International Monetary Fund has said that bank restructuring remains critical to restore the health of the banking sector, move away from the cash-based economy and restart private-sector credit.
The usefulness of stablecoins also creates a broader risk. They could deepen and digitise Lebanon’s existing dollarisation. They would not introduce the dollar, which is already embedded in prices, savings and transactions. However, easier access to digital dollars could encourage movement away from the Lebanese pound and domestic institutions, complicating efforts to rebuild confidence in local deposits and payment channels. The Financial Stability Board has warned that a stablecoin may become systemic in an emerging economy before it reaches the threshold of systemic importance in the jurisdiction where it is domiciled.
Digital dollarisation is not only about which currency people hold, but how it is held and moved. Stablecoins could create infrastructure dollarisation: dependence not only on a foreign currency, but also on the foreign private systems used to issue, hold, redeem and transfer it.
Regulating the institutional chain
Cash dollars can circulate directly. A stablecoin adds an institutional chain. Issuers, reserve custodians, wallet providers and conversion services may operate across several jurisdictions. This can provide services that Lebanese institutions fail to offer, but it can also shift more of the country’s payment infrastructure beyond domestic control.
Lebanon’s regulatory framework now reflects this tension. In January 2026, Banque du Liban introduced a service-based regime for electronic-payment providers, covering digitalmoney, local and cross-border transfers, money collection and payment, and payment facilitation. It also imposed governance, customer -protection, risk -management and anti-money -laundering requirements. The same framework prohibits payment providers from issuing, dealing in or facilitating virtual assets unless the BdL authorises them through specific regulations. A companion decision applies the same restriction to banks and financial institutions. Dollar stablecoins appear to fall within the framework’s broad definition of virtual assets.
The circulars regulate BdL-supervised institutions. They do not state a general prohibition on individuals holding or transferring stablecoins. As of July 2026, the BdL’s published circulars do not appear to include stablecoin-specific authorisation rules.
That leaves a gap between formal restriction and practical access. Residents may still use offshore platforms or transfer tokens directly between wallets. The Financial Action Task Force identifies peer-to-peer transfers through unhosted wallets as a vulnerability because they can take place without a regulated intermediary.
Authorisation should be limited and enforceable
The practical response is to regulate the functions within Lebanon’s reach. The BdL cannot directly control a foreign stablecoin, but it can regulate local intermediaries that exchange, hold or transfer stablecoins. Because the BdL already licenses payment providers by service, any future authorisation should map exchange, conversion into cash or bank money, custody, customer transfers and merchant settlement to the responsible entity and the applicable obligations. The BdL should then assess whether a narrow route through supervised intermediaries would improve visibility and risk control compared with maintaining the current restriction. This is a policy choice, not a foregone conclusion.
Any authorisation should be limited and enforceable. Stablecoins offered through BdL-regulated intermediaries should meet published standards for reserve quality, redemption rights, disclosure and credible home-jurisdiction oversight. Local providers should remain responsible for customer identification, sanctions screening, record-keeping, complaints and clear disclosure of issuer, custody and redemption risks. These conditions are consistent with the FSB’s emphasis on regulating stablecoin activities and functions, assigning clear responsibilities, and requiring effective stabilisation and redemption arrangements.
Authorisation must not be confused with endorsement. Permission for a Lebanese intermediary to offer a service must not be marketed as a BdL guarantee of the token, its issuer, its reserves or redemption at par. Lebanon remains under increased FATF monitoring. Activity through supervised intermediaries would be more visible to Lebanese authorities, although offshore and peer-to-peer use would remain harder to monitor.
Lessons beyond Lebanon
Lebanon’s financial collapse was not caused by payment technology. Among its central failures was the inability of financial institutions and the state to honour their obligations. Stablecoins differ from bank deposits, but they still depend on issuers, reserve custodians, redemption arrangements, technology providers and regulators.
Lebanon should neither present stablecoins as an escape from banking reform nor ignore the payment needs that make them attractive. The challenge is to capture their limited benefits without accelerating digital dollarisation or shifting more financial infrastructure beyond domestic control.
The lesson extends beyond Lebanon. Other fragile or already-dollarised economies may restrict institutions inside their borders while residents access private digital dollars through cross-border services. Lebanon is an early test of whether payment usefulness, monetary autonomy and regulatory control can be managed together.
Mustafa Dah is Associate Professor of Finance and Chairperson of the Department of Finance and Accounting at the Lebanese American University.
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