The withdrawal of US troops has plunged Afghanistan into a deep financial crisis. This has resulted in a nationwide cash shortage, a sharp increase in the price of everyday goods, and closed borders.
In addition, as the national currency has quickly fallen to record lows, banks are running out of cash, leading to closures across the country. This situation makes withdrawing cash an impossible endeavor.
The resulting political turmoil has also led to a steep rise in crypto usage. Afghanistan ranked 20th in the 2021 Global Cryptocurrency Adoption Index, and some Afghans transferred their savings to digital assets because they believe they are safer than banks and local currency.
If the Taliban’s isolation from international finance continues, the regime will likely adopt cryptocurrencies. And why? Because of their popularity and anonymity.
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The role of cryptocurrencies in Afghanistan
About 7 million Afghans live abroad. As a result, local people are highly dependent on remittances from their family members around the world. And it is not uncommon for ise to rely on profits from crypto transactions. The income helps locals meet their daily needs.
With the disruption caused by the Taliban takeover, informal money services hawalas and local money exchange offices ceased to function. Hawalas facilitated cross-border transactions, much like the now-closed Western Union. Digital financial platforms such as PayPal and Venmo do not exist here.
However, locally operated Bitcoin exchanges continued to offer their services amid the unrest.
Future prospects for the use of cryptocurrencies in Afghanistan
Many local Afghans hope cryptocurrencies can lift them out of the current economic malaise. They see cryptocurrencies as a hedge against inflation and the key to a better life for the youth. And since the country operates a cash economy, money in cryptocurrencies gives Afghans the assurance that at least some of their wealth is protected from economic instability.
Moreover, digital currencies provide access to the global economy – directly in Afghanistan – as well as some protection from unpredictable inflation.
Still, crypto investors in Afghanistan use digital currencies in secret. They rely on VPNs (virtual private networks) to hide their geographic location. So it’s not yet clear what the future holds for cryptocurrencies and the Afghan crypto community. Only time will tell.
For Afghans, the future remains uncertain. Until an official government takes control, the safest place to keep their money is in digital currencies.
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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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