Bank runs, financial system stagnation, can Bitcoin play a role in Afghanistan?

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Financial System on the Verge of Collapse

CNBC reported that following the outbreak of turmoil, there has been a large-scale bank run in Afghanistan, leading banks to close their doors due to a shortage of cash. The Western Union money transfer service and the informal money transfer system Hawala are also in a state of shutdown. The current situation in Afghanistan includes:

• Border closures
• Unstable electricity supply
• Bank runs
• Currency devaluation
• Skyrocketing prices
• Nationwide cash shortage

Are Afghan People Embracing Cryptocurrency?

CNBC also mentioned Farhan Hotak, 22, and Sangar Paykhar, 27, both Afghan citizens, who have allocated a significant portion of their assets to cryptocurrency. Farhan Hotak stated:

In Afghanistan, we don't have platforms like PayPal, Venmo, or Zelle. I have to rely on something else. Although the assets in my crypto wallet cannot help me have a good meal tonight, they do shield me from the impact of economic instability. Resources are extremely limited here, and I am very interested in cryptocurrency. I believe I can go further in this field.

Sangar Paykhar added:

I was stuck in Turkey for six months due to Covid quarantine and lost half of my assets due to the lira's plunge. That's when I discovered Bitcoin and was forced to start trading. I made more profit in a month than I did in a year in the construction industry. I plan to increase my cryptocurrency allocation to 40% in the coming year.

Low Internet Penetration in Afghanistan

These two young individuals may be among the few in Afghanistan. According to a report by Datareportal in February of this year, the number of internet users in Afghanistan increased by 996,000, a 13% growth from last year to January this year, totaling 8.64 million internet users in January this year, with an internet penetration rate of only 22%.

According to UN statistics as of November 2019, 85% of the country's population do not have bank accounts.

Farhan Hotak also pointed out that Afghanistan has long relied on cash transactions, with few people able to deposit cash into bank accounts, let alone use cryptocurrency wallets. Living in a remote area without any banks or ATMs nearby, he needs to hold a large amount of cash. He stated:

In reality, Afghanistan is currently in such an extreme state that we can't focus on cryptocurrency at all. With power outages and poor internet signals, conducting transactions is almost impossible. So we just hold onto it.

Local Netizen: No One Believes How Bad It Is Here

There are also discussions on Reddit about whether cryptocurrency can function in Afghanistan. User Vict0r117 pointed out that except for certain cities, almost no one has a computer or access to the internet; going online is simply out of reach. He claimed that he rarely talks to people about Afghanistan because no one believes it is as bad as he describes:

98% of the places I've been to are uneducated. People live without water, electricity, or transportation. If every household didn't have an AK-47 in the corner, you'd think it was the year 1,100. Cryptocurrency won't be used outside the suburbs, and only the elite will have a chance to interact with it.

He also mentioned that even if everyone suddenly had access to the internet, the average annual living cost for an Afghan family is less than $6,000, which would limit the impact on the market.

Objectively, while cryptocurrency does have certain advantages over the current financial system in some areas, believing that Bitcoin can solve all problems may not reflect the actual situation. As reported earlier regarding Venezuela, when people are so impoverished that they can barely survive on a few dollars a month, Bitcoin may not be readily accepted.