In the wake of the recent U.S. troop withdrawal and Taliban takeover, Afghanistan has been plunged into chaos. With most borders closed, basic commodities and items have skyrocketed in price. All of this combined with a cash crunch across the country, Afghanistan is heading for a serious financial crisis.
The value of the local Afghan currency, the Afghani, has plummeted to all-time lows. Banks have closed their doors across many towns and cities due to running out of cash. Cash withdrawals are now nigh on impossible, leaving many Afghan’s seeking an alternative to fiat currency.
In an attempt to salvage their life savings, many Afghans have begun transferring their funds into cryptocurrencies due to them being seen as more stable and secure than the local fiat currency and the country’s banks. As a result, Afghanistan has surged to 20th place in this year’s Global Cryptocurrency Adoption Index.
But it’s not just ordinary Afghans who are eyeing cryptocurrency as a viable financial alternative. In preparation for their potential isolation from global finance, the Taliban themselves are said to be considering the adoption of crypto. The anonymity associated with many digital assets is a particular bonus for them.
“As the Taliban’s takeover of the nation’s capital grew increasingly likely, the country’s central bank pulled hard currency reserves from its vaults, the U.S. halted shipments of widely used dollar bills, and banks imposed capital controls.”– The Wall Street Journal
Ravaged by four decades of conflict, Afghanistan is one of the poorest countries on earth with over 7 million Afghans living outside of the country’s borders. As a result, local Afghans depend heavily on money from family members living overseas to meet their daily needs.
As carnage descended across the country in 2021, local exchange offices and transfer services closed their doors. Devoid of payment systems like Paypal, Western Union, and Venmo, the only service to remain operational in the chaos was locally run crypto exchanges.
Widely seen as a safeguard against inflation and an option to obtain a return on investment through smart trading, cryptocurrency is seen by many local Afghanis as a promising escape from the current economic turmoil.
As an overwhelming cash economy, many Afghans also feel that assets held in crypto wallets give some assurance that at least some of their wealth is secure against economic instability. But most importantly, they can provide ordinary Afghans with access to the global economy from within a country that may see economic restrictions slapped on the new Taliban regime.
However, the Afghans who are using cryptocurrencies are often doing so in private and using VPNs due to the current instability plaguing the country. The future of Afghanistan is still being written, but it’s possible that cryptocurrency could indeed play a huge role in the future of the country.