Since the Taliban took over Afghanistan in August, cryptocurrency use has soared as Afghans seek a way to maintain financial stability after the upheaval. Afghanistan is now in the top 20 out of 154 countries ranked according to their cryptocurrency use, joining the United States, China, and Russia. Last year, Afghanistan was ranked among the lowest.
While the use of cryptocurrency in Afghanistan may be the solution for a nation suffering from lack of cash and an unstable economy, it can also provide a cover for terrorist entities and drug traffickers that can pose risks to the Western world. Its potential for good use or bad depends on who is using it.
What Spurred the Afghan Use of Cryptocurrency?
As the US made plans to pull troops out, many Afghans anticipated difficult times ahead and began transferring savings to a vehicle they felt was more secure than fiat bank accounts: cryptocurrency.
The move proved smart. As the pullout began and the Taliban took over, the US and other countries halted foreign aid payments and the country’s own central bank froze most of its foreign reserves. Long lines formed outside local banks as panic pervaded, and many banks had to shut their doors as they ran out of cash. While the Taliban is scrambling for funds and Western countries are trying to take a moral stand against the new hardline regime, Afghan citizens are caught in the crossfire.
Cryptocurrency seems like a promising solution, and more Afghans are jumping on the bandwagon. Informal money-service businesses and changers have faced disruptions, but Bitcoin exchanges have been able to operate continuously. This stability is invaluable during such unstable times. Additionally, Afghanistan relies heavily on money sent from expats living abroad, and cryptocurrency is currently the smoothest way to complete these international transactions.
Challenges Facing Cryptocurrency Use in Afghanistan
While cryptocurrency is certainly promising, it is not a definitive solution for the many Afghans currently in need. According to World Bank Afghanistan, only 15% of adults in Afghanistan have bank accounts. That poses a problem for setting up a crypto wallet. While there are ways around it, such as using accounts of family or trusted friends, these are not sustainable solutions and not everyone has access to this kind of help.
Additionally, many Afghans do not even have access to the internet. According to DataReportal, which conducted a survey in January 2021, there are nearly 40 million people in Afghanistan, and only 8.64 million have internet access. For cryptocurrency to really take off, more people need internet access and steady use of electricity.
The Taliban’s Relationship to Cryptocurrency
The Taliban has not currently taken a stance for or against cryptocurrency, but some supporters of the new government feel it would be a wise move to adopt it. “Bibi Janey,” an Afghan-American woman who has been vocal in her support of cryptocurrency, recently tweeted, “I’d like to suggest to the Taliban senior leadership to hold an emergency meeting with money exchangers (sarafis) to train them on exchanging Bitcoin.”
Not only does Bitcoin offer anonymity, it offers the chance for the Taliban to bypass Western governments and sanctions. Understandably, Western governments are worried that the Taliban will do just that – adopt crypto to get around sanctions. Moreover, cryptocurrency can easily be used as a tool for money laundering and weapons purchases which Western governments would not like to see from Afghanistan.
Cryptocurrency and Terror Organizations: Cause for Concern
The use of cryptocurrency by terrorist groups, in general, is cause for concern among Western countries. Hamas has already embraced it and recently boasted of raising a record number in crypto donations.
Cryptocurrency may be the perfect solution for Afghan citizens who face cash shortages and need savings vehicles, but at the same time it may be the perfect vehicle for the country’s extremist government. Should the Taliban embrace an economic policy that includes crypto, the US and its allies face a challenge unique to our times: enforcing economic sanctions when alternative financing is available.