Ilhan Yavuz Ataol, Queen Mary University of London
Afghanistan’s economy has been severely affected as the turmoil in the country has gotten increasingly worse. The former UN official states that Afghanistan’s Economy is weeks away from collapsing (Shalvey). This suggests that many Afghan citizens are on the verge of losing their financial assets. However, there is something that is mitigating the financial fallout for Afghan people: Crypto Adoption
What has happened to Afghanistan’s economy?
The destabilised national banking system is the foremost problem since the Taliban has taken control of the central bank (Najafizada). Furthermore, many businesses have shut down, and the country is experiencing a cash shortage; as the US is holding 9 billion dollars of central bank reserves. On top of this, the financial services companies Western Union and MoneyGram have stopped their activity in Afghanistan. Under these circumstances, Afghan people, who hold the local currency, are trying to exchange them for dollars or even for goods since the local currency has historically depreciated to its lowest figures (Beaumont).
How can crypto help Afghan citizens?
The decentralised nature of cryptocurrency benefits Afghan citizens the most. Since there is no need for an intermediary in cryptocurrency exchange, the government or the Taliban is unable to track cryptocurrency transactions. For this reason, people in Afghanistan are using cryptocurrencies to safeguard their money and avoiding potential bank runs (Smith & Stevens).
Although cryptocurrency adoption is a fairly new concept for Afghanistan, the 2021 Global Crypto Adoption Index shows that the country is ranked 20th on the list (“The 2021 Global Crypto” ). Despite having only 8.64 million internet users out of the 39 million population (Kemp), and experiencing frequent power outages, Afghanistan managed to be in the top 20 countries with the most crypto adoption. This shows that Afghan people are trying to find ways to tackle the economic instability and uncertainty that has been ongoing for a great deal of time.
Since cryptocurrencies are blockchain-based digital currencies, they are unresponsive to the economic conditions of a country in disturbance. Therefore, people in Afghanistan who had invested in cryptocurrencies will be the last ones to be financially affected by the economic crisis. Although investing in crypto is extremely risky due to the volatile nature of the market, it can still provide Afghan people some hope of achieving financial stability during this time of cash shortage, and enormous currency depreciation.
In conclusion, cryptocurrency appears to be a safer store of value than the local currency during the turmoil in Afghanistan. Its decentralized and unresponsive nature allows the crypto holders to protect their money and withstand the cash shortage in the country.
Beaumont, Peter. “Afghans Face Economic Ruin as Prices Rise and Cash Runs Low.” The Guardian, Guardian News and Media, 22 Aug. 2021, www.theguardian.com/world/2021/aug/22/afghans-face-economic-ruin-as-prices-rise-and-cash-runs-low.
Kemp, Simon. “Digital in Afghanistan.” DataReportal, DataReportal – Global Digital Insights, 11 Feb. 2021, datareportal.com/reports/digital-2021-afghanistan.
Najafizada, Eltaf. “Who Is Taliban ACTING Central Bank Chief Mohammad Idris?” Banks News | Al Jazeera, Al Jazeera, 23 Aug. 2021, www.aljazeera.com/economy/2021/8/23/taliban-appoints-central-bank-chief-as-prices-rise-cash-runs-out .
Shalvey, Kevin. “Afghanistan’s Economy May Be Only Weeks from Collapse, According to a Former UN Official.” Business Insider, 28 Aug. 2021, www.businessinsider.com/afghanistan-economy-collapse-weeks-taliban-united-nations-official-2021-8?r=US&IR=T .
Smith, Jordan, and Pippa Stevens. “Afghans Turn to Crypto Market for Stability DURING Taliban Takeover: CNBC after Hours.” CNBC, CNBC, 24 Aug. 2021, www.cnbc.com/2021/08/24/afghans-turn-to-crypto-market-for-stability-during-taliban-takeover.html.
“The 2021 Global Crypto Adoption Index: Worldwide Adoption Jumps over 880% with P2P Platforms Driving CRYPTOCURRENCY Usage in Emerging Markets.” Chainalysis, 18 Aug. 2021, blog.chainalysis.com/reports/2021-global-crypto-adoption-index.