How do Afghans use cryptocurrencies under the Taliban regime?

According to a special report by "Cointelegraph," Afghans have shown a strong interest in cryptocurrency, with more and more people using it to circumvent U.S. sanctions and receive the rewards they are entitled to.

In August last year, after the Taliban took full control of Afghanistan, many international non-governmental organizations and service providers ceased their economic and financial activities in the country, including payment services like Western Union and the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Many Afghans have started learning to use cryptocurrency and blockchain technology to at least be able to receive remittances from abroad. Afghanistan, a country with a history of 5,000 years, lacks electronic payment services like PayPal and Venmo, leaving Afghans with no opportunity for online transactions.

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Local cryptocurrency trader Heshmat Aswadi, who is studying business administration at Herat University, initially wanted to create a fintech blog. However, he almost lost hope when he realized that he couldn't monetize the platform through writing blog articles, affiliate marketing, and online sales because most people use PayPal for payments. "We lost a lot of opportunities because most people use PayPal for payments," Aswadi said. Despite learning a lot about running a blog, it was useless as he couldn't earn from it.

Subsequently, he started exploring cryptocurrency, which he considers "one of the best things that happened to him." He mentioned that with the development of cryptocurrency after mid-2021, he now earns some extra income by trading small amounts of digital assets.

Aswadi believes that developing countries like Afghanistan and Iran should consider using digital currencies as legal tender, "at least using central bank digital currencies," with CBDC still being an option.

Remittances

When the Taliban took control, banks such as Western Union stopped their remittance services in Afghanistan, leaving many Afghans who relied on funds from abroad unable to receive money through traditional channels. Currently, the only way to receive funds from other countries is through the use of cryptocurrency.

According to data from Chainalysis in 2021, Afghanistan ranks 20th globally in the Cryptocurrency Adoption Index.

Local cryptocurrency traders and dealers in one of Afghanistan's largest cities, Herat, such as Ali Rahnavard, have seen a significant increase in the number of Afghans using cryptocurrencies, with his customer base growing tenfold in the past year.

"The main reason behind this growth is people needing to find a way to receive funds from family and friends residing in other countries," explained Ali Rahnavard, noting that this form of payment is cheaper and faster than Western Union remittances.

Ali Rahnavard believes that cryptocurrency could help facilitate the Taliban's re-entry into international business. While the Taliban may not possess knowledge of blockchain technology at present, they are at least not prohibiting the use of cryptocurrencies.

How is Cryptocurrency Used in Afghanistan?

In November 2021, Binance announced that it would not support Swift bank transfers to user accounts in a long list of countries, including Afghanistan. As most Afghans use Binance, this decision has made it more challenging for Afghans to access cryptocurrency. Therefore, users go to cryptocurrency dealers' stores to obtain cryptocurrency, where they pay in local fiat currency, Afghan Afghani, or US dollars.

The dealers then contact foreign partners to send the cryptocurrency to their wallets. Dealers typically use the local hawala system to deposit money into the remitters' bank accounts. Ali Rahnavard mentioned that dealers do not use credit cards or debit cards due to the around 11% fee they incur for international purchases.

The main cryptocurrency sent to customers by dealers is Tether USDT.

Is Cryptocurrency Banned by the Taliban?

The Taliban has not announced any regulations or bans regarding digital currencies. Ali Rahnavard stated that if a top Islamic scholar declares cryptocurrencies as sacred, the Taliban would ban them without hesitation. However, if they view it as halal food, "we might be forever using the best technology in the world."

One of the major obstacles to widespread cryptocurrency adoption in Afghanistan is the low literacy rate, with only 43% of the population being literate, and even fewer being able to access the internet.

Significance of Cryptocurrency in Afghanistan

Upon taking power, the Taliban restricted bank account withdrawals in an attempt to address the cash shortage caused by US sanctions. As a result, millions of Afghans were unable to purchase food, leading to international media coverage and a flood of donations, with some even resorting to trying to sell their children.

Since the US withdrawal in August last year, many non-governmental organizations have also left Afghanistan, causing job losses and a financial crisis. For many families, the only way to survive was to earn money from abroad, which would now be nearly impossible without cryptocurrency.

Ali Rahnavard believes that while other countries are exploring cryptocurrency due to its status as a new technology and a desire to learn how to use it along with blockchain, the situation is different in Afghanistan. "We must understand cryptocurrency and its underlying technology, because if we don't, I don't know what bigger disaster might happen."

This article is authorized for reprint from Horizon News Network