US Sanctions Since Taliban Takeover Pushed Afghans To Turn To Cryptocurrencies
Since the Taliban took control of Afghanistan, US sanctions, collapsing banks, and the cessation of international aid and financial transfers have left the country’s economy in shambles. Crypto is on the way to save the day.
Farhan Hotak, 22, from the province of Zabul in southern Afghanistan, was left with no money after the Taliban took charge in August last year.
Hotak’s sole source of income was a virtual wallet containing a few hundred dollars in Bitcoin. Hotak was able to leave to Pakistan with his family of ten after converting it into conventional money.
“After the Taliban takeover, crypto spread like wildfire over Afghanistan,” he said. “There is almost no other way to receive money”.
Hotak and his companions utilize Binance’s peer-to-peer cryptocurrency exchange, which allows them to purchase and sell coins directly with other Binance users. Hotak has taken up temporary residence in Pakistan, where he is trading Bitcoin and Ethereum once more. He is now back in Afghanistan, vlogging and teaching people about cryptocurrencies, which are digital currencies with no physical form that can have value.
Cryptocurrency supporters claim that they represent the future of money and that they will eliminate the need for individuals to rely on banks. In Afghanistan, banks have shut down, forcing individuals to turn to cryptocurrencies not only for trading but also for survival.
Web searches in Afghanistan for “bitcoin” and “crypto” spiked in July, right before the takeover in Kabul, according to Google trends data, as Afghans lined outside banks in vain attempts to withdraw cash.
The use of crypto increased dramatically after the Taliban took control in August 2021. Afghanistan was ranked 20th out of 154 nations in terms of cryptocurrency usage by the research firm Chainalysis last year.
Only a year prior, in 2020, the company deemed Afghanistan’s crypto presence to be so minor that it was left off the list entirely.
The country’s “crypto revolution” is a result of US sanctions against the Taliban and Haqqani network, according to Sanzar Kakar, an Afghan American who founded HesabPay, an app that allows Afghans to transfer money using cryptocurrency, in 2019.
Transactions with Afghan banks have all but ceased as a result of the sanctions. The US has seized $7.1 billion in assets from the Afghan central bank and halted US cash transactions. The printing of Afghan currency by companies in Poland and France has come to a stop.
Swift, the Society for Worldwide Interbank Financial Telecommunication, which underlies international financial transactions, has halted all operations in Afghanistan.
Following the liquidity crisis, commercial banks were unable to lend money, and retail clients were unable to withdraw their own funds from banks.
Afghanistan’s economy, already ravaged by war and reliant on foreign help and donors for 80% of its GDP, was on the edge of collapsing.
“We’re using crypto to try to solve this problem, that 22.8 million Afghans are marching toward starvation, including one million children that might starve to death this winter,” said Kakar.
Kakar’s HesabPay software enables quick money transfers from one phone to another without involving banks, the Afghan government, or the Taliban. The app has over 2.1 million transactions and 380,000 active users in its first three months.
In Afghanistan, aid organizations have recognized the potential of cryptocurrency.
Roya Mahboob launched Digital Citizen Fund, an NGO that teaches young Afghan women computer programming and financial literacy, in 2013. In Herat and Kabul, the organization maintained 11 women-only IT centers, where 16,000 women were taught everything from Windows software to robotics.
Following the Taliban’s takeover, the organization refocused its efforts to teach bitcoin training to young women via Zoom video calls.
The Digital Citizen Fund has also begun transferring money to Afghan families in the form of cryptocurrency to assist them in providing food and shelter, as well as, in certain circumstances, assisting people in escaping the country.
“Crypto has been critical for Afghanistan in the last six months. Everybody’s talking about trading. It got to a point where I got on a plane to Kabul and people were talking about Dogecoin and Bitcoin,” Mahboob told the BBC.
Stablecoins, or virtual coins tethered to the US dollar, are gaining traction in Afghanistan, removing the volatility typically associated with cryptocurrency. The beneficiaries then use money exchangers to convert the stablecoins to local cash.
They can also be sent to recipients directly without requiring a bank account.
Since the Taliban assumed control of the country and SWIFT ceased transactions, commercial banks have been unable to lend money and retail clients have been unable to withdraw their own funds from banks.
However, there are obstacles that make cryptocurrency more difficult to obtain for the average Afghan.
While internet access is increasing, it is still limited. According to DataReportal.com, there were 8.64 million internet users in Afghanistan in January 2021.
Power outages are a typical occurrence, so unreliable electricity is a serious issue. The new Taliban rulers of Afghanistan have been accused of failing to pay Central Asian electrical suppliers. And, with the banking system in shambles, many Afghans are unable to pay their electricity bills.
When it comes to cryptography, education is also crucial. Hotak claims to have identified trustworthy online communities on Telegram, WhatsApp, and Facebook that provides him with trade tips and sound advice. However, there is a lot of disinformation regarding cryptocurrency on the internet.
Despite the high learning curve and numerous barriers to access, adopting crypto in Afghanistan is considered a step forward from the existing quo.
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