How Bitcoin is helping Afghans against the Taliban
How Bitcoin is helping Afghans against the Taliban
Bitcoin

How Bitcoin is helping Afghans against the Taliban

By Marco Cavicchioli - 27 Aug 2021

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Afghans appear to have started using Bitcoin to overcome some of the limitations imposed by the Taliban regime. 

Liquidity at risk in Afghanistan

After the Taliban seized power, there is growing speculation that a real liquidity crisis may be triggered in Afghanistan. 

The main problem derives from the fact that about 9 billion dollars of monetary reserves of the central bank are held abroad and have already been frozen due to the plan of Western forces to block resources that the Taliban could draw on to govern the country. If we compare, Afghanistan’s entire GDP is just about $20 billion. 

International financial aid, which accounts for as much as 43% of the country’s GDP, has also been blocked, exacerbating the problem. 

That could cause a liquidity crisis first of all to the new government itself, which could decide in some way to make up for the problem by eroding citizens’ savings. 

Afghans are afraid of losing their money, and in fact, they have already started running to the banks to withdraw as much cash as possible. 

The real risk is that banks do not have enough cash to support all withdrawals or even that the new regime itself imposes limitations on withdrawals or the movement of capital, especially abroad. 

Afghans resort to Bitcoin

In such a scenario, it is not surprising that Chainalysis’ recent 2021 Global Crypto Adoption Index found a real surge in Bitcoin exchanges in the country. 

Suffice it to say that Afghanistan suddenly jumped to 20th place, out of 154 countries analyzed, in terms of the cryptocurrency adoption index compiled by Chainalysis. Last year, it didn’t even make the list. 

The platforms used in Afghanistan to exchange Bitcoin

In particular, the volume of exchange on peer-to-peer platforms has skyrocketed, jumping as high as seventh place, ahead of countries like Nigeria and Colombia. 

These platforms allow individual buyers or sellers to trade directly with other individual sellers or buyers.

These are platforms that do nothing more than putting the seller in contact with the buyer, and vice versa, while the exchange then takes place later directly between them. 

That is why it is speculated that the jump in Bitcoin and cryptocurrency usage in Afghanistan is mainly due to the citizens, not the Taliban regime. 

Not only are small amounts usually exchanged on these platforms, but the sellers are likely other Afghans who own Bitcoins and agree to sell them in exchange for local currency. 

For example, last week, CNBC told the story of an Afghan citizen currently living in the Netherlands who has been trading cryptocurrencies since last year or another who lives in a remote part of the country with no banks and believes that cryptocurrencies are the future. 

Google Trends on Bitcoin

Google Trends also shows a spike in searches for bitcoin in Afghanistan between late June and early July, which is when the prospect of the Taliban regaining power was beginning to emerge. 

Finally, it should be mentioned that the local currency, the Afghanis (AFN), suddenly devalued by 6.7% in a single day in mid-August, after another 4.7% loss in value since the beginning of the year. 

Why Bitcoin helps against the Taliban

In all of this, Bitcoin can help for two reasons

First of all, in the long run, it tends not only not to lose value, unlike inflationary currencies such as Afghani, but generally to acquire it. 

It is still a high-risk investment, but so far over the long term, its dollar value has performed far better than any other fiat currency in the world. 

But probably the main reason is another one. In fact, no one can impose any kind of limitation on bitcoin transactions, neither temporal, nor quantitative, nor geographical. 

Therefore Afghans who want to escape the limitations that the new regime could impose on the free movement of capital, or who want to prevent the Taliban from seizing their savings, find in Bitcoin an excellent ally, which protects their money from government impositions. It also allows them to send and receive money from abroad easily. 

Since many Afghans are trying to flee the country, bitcoin could also help them send remittances to relatives back home. 

It should also be added that nowadays, BTC transactions using Lightning Network are immediate and have negligible costs, so they are perfect even for those who need to send small amounts. 

Currently, there are several apps available that act as bitcoin LN wallets, so you only need a smartphone to use them. 

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".

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