Since the Taliban assumed control of Afghanistan, the country’s economy has been in disarray due to US sanctions, collapsing banks, and the halt of international aid and financial flows. The cryptographic revolution is on its way to saving the day.
Farhan Hotak, a 22-year-old from the southern Afghan province of Zabul, was left penniless after the Taliban took control in August of last year.
Hotak’s only source of income was a Bitcoin wallet with a few hundred dollars in it. After turning the money into regular currency, Hotak and his ten-member family were able to travel to Pakistan.
“After the Taliban takeover, crypto spread like wildfire over Afghanistan,” he said. “There is almost no other way to receive money”.
Hotak and his friends use Binance’s peer-to-peer cryptocurrency exchange, which allows them to buy and sell coins with other Binance users directly. Hotak has temporarily relocated to Pakistan, where he is once again trading Bitcoin and Ethereum. He’s now back in Afghanistan, vlogging and teaching people about cryptocurrencies, which are virtual currency with no physical presence.
Supporters of cryptocurrency argue that it is the future of money and that it will eliminate the need for people to rely on banks. Banks have closed in Afghanistan, forcing people to rely on cryptocurrency not only for trading but also for survival.
According to Google trends data, web searches for “bitcoin” and “crypto” in Afghanistan soared in July, just before the takeover in Kabul, as Afghans queued outside banks in hopeless attempts to withdraw cash.
After the Taliban gained control in August 2021, the usage of cryptography skyrocketed. Last year, the research firm Chainalysis rated Afghanistan 20th out of 154 countries in terms of cryptocurrency usage.
Afghanistan’s crypto footprint had been deemed so insignificant by the corporation a year previously, in 2020, that it was dropped off the list entirely.
According to Sanzar Kakar, an Afghan American who founded HesabPay, an app that allows Afghans to transfer money using cryptocurrencies, the country’s “crypto revolution” is a result of US sanctions against the Taliban and the Haqqani network in 2019.
As a result of the sanctions, transactions with Afghan banks have all but ended. The US seized assets worth $7.1 billion from the Afghan national bank and blocked US currency transactions. The printing of Afghan currency by Polish and French enterprises has ceased.
Swift, the Society for Worldwide Interbank Financial Telecommunication, has suspended its operations in Afghanistan.
Commercial banks were unable to lend money during the liquidity crisis, while retail customers were unable to withdraw their own monies from banks.
Afghanistan’s economy was on the verge of crumbling, already damaged by war and dependant on foreign aid and donors for 80% of its GDP.
“We’re using crypto to attempt to tackle this problem,” Kakar added, referring to the fact that 22.8 million Afghans are on the verge of hunger, with one million children at risk of dying this winter.
Kakar’s HesabPay software allows for speedy money transfers between phones without the use of banks, the Afghan government, or the Taliban. In its first three months, the app had over 2.1 million transactions and 380,000 active users.
Aid organisations in Afghanistan have recognised the value of cryptocurrencies.
In 2013, Roya Mahboob founded Digital Citizen Fund, an NGO that teaches computer programming and financial literacy to young Afghan women. The company ran 11 women-only IT facilities in Herat and Kabul, where 16,000 women were trained everything from Windows software to robotics.
Following the Taliban’s takeover, the organisation refocused its efforts to use Zoom video conversations to provide bitcoin training to young women.
The Digital Citizen Fund has already began delivering cryptocurrencies to Afghan families to assist them in providing food and shelter, as well as, in certain cases, assisting people in fleeing 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.
In Afghanistan, stablecoins, or virtual coins tied to the US dollar, are gaining appeal, reducing the volatility associated with bitcoin. The beneficiaries then transfer the stablecoins to local currency using money exchangers.
They can also be sent straight to recipients without the need for a bank account.
Commercial banks have been unable to lend money and retail clients have been unable to withdraw their own funds from banks since the Taliban took control of the country and SWIFT suspended transactions.
However, there exist barriers that make it more difficult for the common Afghan to get cryptocurrencies.
Despite the fact that internet access is growing, it is still limited. In January 2021, there were 8.64 million internet users in Afghanistan, according to DataReportal.com.
Unreliable electricity is a big concern because power outages are common. Afghanistan’s new Taliban leadership have been accused of not paying Central Asian power suppliers. Many Afghans are unable to pay their electricity bills because the financial system is in turmoil.
Education is equally important when it comes to cryptography. Hotak claims to have found reputable online forums on Telegram, WhatsApp, and Facebook where he can get trade suggestions and good guidance. On the other hand, there is a great deal of misinformation about bitcoin on the internet.
Despite the steep learning curve and various restrictions to entry, Afghanistan’s use of crypto is seen as a step forward from the status quo. (Adapted from BBC.com)