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Is The Financial Upheaval In Afghanistan The Optimal Strategy To Test The Efficacy Of Cryptocurrencies?: A Cursory Glance

Cryptocurrency surges are frequently triggered by delusions of monetary success. Instead, investors in Afghanistan are grabbing hold of digital currency in an effort to preserve the petite wealth they do have and keep it off the Taliban's reach. Afghan cryptocurrency investors are not looking to become affluent.

They are merely attempting to keep the Taliban from grabbing what they have.[1] According to a report published last year by the blockchain research company Chainalysis, Afghanistan has been among the top 20 nations in the world for cryptocurrency uptake. The grading of the results by current exchange rates per capita is in favor of less developed countries. [2]

A major obstacle to buying cryptocurrencies in Afghanistan is the propensity to transfer money directly from an Afghan bank account to an exchange like Binance. Sanctions also affect banking ties with other countries.

The cryptocurrency was used as a conventional Hawala transfer (Money Laundering), which accounts for around 90% of financial transactions in Afghanistan, Maihan currently runs about $400,000 in cryptocurrency transactions each week. They transfer funds—mostly dollars—to contacts in states like Iran, Turkey, and the United States. In exchange, those individuals send Maihan's Binance wallet digital tokens like Bitcoin and stablecoins.[3]

Maihan slaps a commission on each cryptocurrency transaction that can reach 1.5 percent, which is substantially higher than the standard rate levied by exchanges notably Binance.[4]

Afghanistan's economy is in ruins as a consequence of US sanctions, crumbling banks, the halting of international help, and cash transfers amid the Taliban takeover. Crypto is stepping in to save the day. Cryptocurrency proponents claims that they are the way of the future and that they will make banks obsolete. And in Afghanistan, banks have shuttered, people being forced to be using cryptocurrencies not just for business but also for subsistence.

So according Google Trends data, web searches in Afghanistan for the terms "bitcoin" and "crypto" spiked in July, right before the takeover in Kabul, as Afghans queued in crowds outside banks to try and withdraw money in despair.

While this was unfolding, all transactions thru the Swift system, which is the bedrock for international financial transactions, were suspended.[5]

Due to the impending liquidity crisis, commercial banks were unable to provide loans and sole traders were unable to withdraw their own funds from banks. Afghanistan's economy, already devastated by war and reliant on foreign funding and donors for 80% of its GDP, was on the edge of collapse.

It can be tacit that Cryptocurrency is particularly well suited for international crowdfunding as it overlooks national boundaries and is anonymous there is no centralized authority that may block transactions, for example in response to sanctions.

For instance, Digital Citizen Fund, an NGO Roya Mahboob established in 2013, educates computer programming and financial literacy young Afghan women. Featuring 11 women-only IT centers in Herat and two more in Kabul, the organization trained 16,000 women in everything from Windows software to robotics.

After the Taliban took control, the organization refocused its efforts to train young women in bitcoin via Zoom video calls. Similarly, the Digital Citizen Fund employees started using cryptocurrency to send funds to Afghan families so they could aid them with shelter, food, and, in some circumstances, emigration.[6]

Afghanistan has relied solely on crypto for the past year. Everyone is pondering trading. The so-called "stablecoins," which are digital coins tethered to the US dollar and alleviate the volatility typically associated with cryptocurrencies, are gaining popularity in Afghanistan. The stablecoins are then exchanged at money exchanges by the beneficiaries for local currency. A small number of young Afghans are able to sidestep the brunt of the crisis because to digital currencies that are immune to international sanctions.

However, there are obstacles that make it more challenging for the common Afghan to access cryptocurrencies.

Internet accessibility is still limited, despite growth. DataReportal.com estimates that 8.64 million people used the internet in Afghanistan in January 2022. Another critical challenge is unreliable electricity, which frequently has power outages. The new Taliban government in the nation has been charged with failing to pay Central Asian electricity suppliers. Many Afghans also lack the financial means to pay their electricity bills due to the collapse of the banking sector.

When it comes to crypto, education is equally crucial. the crypto exchanger claimed to have discovered reputable online groups on Telegram, WhatsApp, and Facebook that provide trading guidance and ideas. However, it's also very simple to get a lot of false information regarding cryptocurrency online.

Cryptocurrency for Afghanistan's situation is a tremendous means to get over any kind of political or economic restrictions, but it is also a weapon that can transform the lives of those residing under authoritarian regimes. Compared to conventional Afghan favorites like Western Union or the hawala system, transfers are quick and commissions are significantly lower. Even so, despite the momentum's growth, Afghanistan's high levels of illiteracy and lack of internet access will continue to limit trading volume.

Reference:
  1. Afghan crypto buyers aren't trying to strike it rich. They're just trying to keep what they have out of the Taliban's reach, Fortune, https://fortune.com/2022/04/24/afghan-crypto-buyers-keep-money-out-of-taliban-reach-stablecoin-herat/ (last visited Jul 2, 2022).
  2. The 2021 Global Crypto Adoption Index: Worldwide Adoption Jumps Over 880% With P2P Platforms Driving Cryptocurrency Usage in Emerging Markets, Chainalysis (2021), https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index/ (last visited Jul 2, 2022).
  3. How This 26YO "Crypto Baron" Is Helping Afghans Preserve Their Wealth, IndiaTimes (2022), https://www.indiatimes.com/worth/news/how-a-crypto-baron-has-come-to-rescue-of-crisis-hit-afghanistanis-568131.html (last visited Jul 3, 2022).
  4. Afghan crypto buyers aren't trying to strike it rich. They're just trying to keep what they have out of the Taliban's reach, supra note 1.
  5. Afghans turn to cryptocurrencies amid US sanctions, BBC News, March 16, 2022, https://www.bbc.com/news/world-asia-60715707 (last visited Jul 3, 2022).
  6. Roya Mahboob - Co-Founder and CEO @ Digital Citizen Fund - Crunchbase Person Profile, Crunchbase, https://www.crunchbase.com/person/roya-mahboob-2 (last visited Jul 3, 2022).

Written By: Zainab Sadat Nasiri, Kabul, Afghanistan
Email: [email protected]

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