Afghans Turn to Cryptocurrencies Amid US Sanctions

Finance News Politics World

Wednesday, 16 March, 2022

US sanctions, failing banks, and the drying up of foreign aid and cash transfers since the Taliban takeover have left Afghanistan’s economy in tatters. Crypto is coming to the rescue.

Following the Taliban takeover in August last year, 22-year-old Farhan Hotak from the province of Zabul in southern Afghanistan was left with no cash in hand.

Mr Hotak’s sole source of income became a few hundred dollars of Bitcoin in a virtual wallet. After turning it into a traditional currency, Hotak managed to flee to Pakistan with his family of ten.

“After the Taliban takeover, crypto spread like wildfire over Afghanistan,” he said. “There is almost no other way to receive money”.

Mr Hotak and his friends use Binance’s P2P crypto exchange, which allows them to buy and sell their coins directly with other users on the platform. Finding temporary refuge in Pakistan, Mr Hotak is trading Bitcoin and Ethereum again and is now back traveling through Afghanistan, vlogging and teaching people about cryptocurrencies – digital money with no physical form that can have value.

Fans of cryptocurrencies say they are the future of money and will stop people having to rely on banks. And in Afghanistan, it’s banks that have stopped working, causing people to turn to cryptocurrency not just to trade, but to survive.

Google trends data shows that web searches in Afghanistan for “bitcoin” and “crypto” increased in July just before the takeover in Kabul, while Afghans queued outside the banks in fruitless attempts to withdraw cash.

After the Taliban takeover in August 2021, the use of crypto rose sharply. Last year, the data firm Chainalysis gave Afghanistan a rank of 20 out of the 154 countries it evaluated in terms of their crypto adoption.

Just one year before, in 2020, the company considered Afghanistan’s crypto presence to be so minimal as to entirely exclude it from its ranking.

According to Sanzar Kakar, an Afghan American who in 2019 created HesabPay, an app that helps Afghans transfer money using crypto, the country’s “crypto revolution” is a result of the US sanctions against the Taliban and Haqqani group, who are now in power.

The sanctions have meant that transactions with Afghan banks have all but stopped. The US has seized $7.1b (£5.4b) worth of assets from the Afghan central bank and ended transfers of US currency. Companies in Poland and France contracted to print the Afghan currency ended shipments.

The Society for Worldwide Interbank Financial Telecommunication, known as the Swift system, which underpins international financial transactions, suspended all services in Afghanistan.

The liquidity crisis that followed meant that commercial banks couldn’t lend money, and retail customers couldn’t take their own money out of banks.

An already war-devastated economy with 80% of its GDP coming from foreign aid and donors, Afghanistan was left on the verge of collapse.(thewalkeronline)