Afghani Taliban Ban Cryptocurrency, Arrest 13
The Taliban have begun stringently enforcing a cryptocurrency ban that was implemented around 3 months ago. According to local reports, 16 crypto exchanges were shuttered in Herat the country’s western province and third-largest city. Several dealers have been arrested for their involvement in defying orders to stop trading digital tokens.
What Happened
Afghanis began relying heavily on digital assets following the Taliban takeover in 2021. Facing global sanctions, and unable to safely secure money, locals moved to securing their savings in cryptocurrency. Outside of preserving wealth, cryptocurrency was used largely to protect finances from Taliban reach — what many believe to be the reason the Taliban has moved to ban digital assets from the country.
Google trends showed that ‘crypto’ and ‘bitcoin’ web searches increased just before the Taliban takeover. In fact, the adoption trend was so high that Afghanistan joined Chainalysis’ Top 20 Global Crypto Adoption Index for 2021, which maps the usage of digital assets globally.
According to reports, crypto exchanges and users were given a grace period to comply with the ban imposed by Afghanistan’s Central Bank, but ultimately faced government-imposed shutdowns due to noncompliance. The government has urged those associated with cryptocurrency to refrain from using it, hinting at large risks associated with defiance.
However, sources familiar with the scene there told Cointelegraph that “no previous announcement or warnings were given.”
Afghanistan joins a much smaller group — including China — of countries who have banned digital currencies outright.
Sayed Shah Sa’adat, head of the police’s counter-crime unit in Herat, told Bloomberg “The central bank gave us an order to stop all money changers, individuals, and businesspeople from trading fraudulent digital currencies like what is commonly referred to as Bitcoin.” He shared that 13 individuals had been arrested, released on bail later, and around 20 crypto-related businesses have been closed. “Afghanistan’s Bank (central bank) stated in a letter that digital currency trading has caused lots of problems and is scamming people, therefore they should be closed,” Sa’adat said.
Afghani people are extremely distressed by the ban’s enforcement. Standard banks and monetary services are scarce to nonexistent in certain regions of Afghanistan — cryptocurrency was an easy and approachable option to send or receive assets. After the Taliban regained power, finances for residents worsened as the county was cut off from foreign aid and their overseas assets were frozen under U.S. sanctions.
This isn’t the first ban on digital trading — in June, Afghanistan’s Central Bank banned online foreign exchange trading as well. A spokesman told Bloomberg, “Afghanistan Bank considers online forex trading illegal and fraudulent, and there is no instruction in Islamic law to approve it. As a result, we have banned it.”
Risks and Reasons
According to local reports from ATN-News, the main reason for the ban was the volatility of the asset and that the exchanges were not based in Afghanistan. Another noted reason was that cryptocurrency was used for scams, though no specific incident was mentioned.
“They banned it because they cannot control it,” a trader with over six years of crypto experience told Cointelegraph, adding:
“The government wants to see, control and manipulate everything in the country. Crypto is volatile, I agree, but everyone who uses it must know that. We also have stablecoins like Tether, USD Coin and many more for the people who just want to send or receive remittances to/from other countries.”
The Taliban has also referred to cryptocurrency trading as ‘gambling’ which is haram, or forbidden to Muslims, as it has elements of wagering and uncertainty.
Because the Taliban is a sanctioned group, business have sought convoluted methods of receiving payment from overseas buyers. Banks and other foreign financial institutions are banned from transacting with banks the Taliban runs, all of the banks in Afghanistan. Logistics has also crippled, with airlines refusing to ship goods and firms like DHL leaving entirely.
These issues led to a steady but fast rise for Bitcoin as a method of transacting. Tether was also a popular choice for Afghanis, as it is pegged to the US dollar. This was exceptionally appealing as well because formerly international transactions would incur a fee of around 11%.
“It’s our future,” said one Afghani who spoke with The National News.
Cash shortages caused by US sanctions bankrupted many Afghanis, some of whom resulted to selling their children in order to pay for food and other goods. Leading to international media coverage, millions in donations flowed to Afghanistan shortly thereafter.
BookBlocks and the ‘Women for Afghan Women’ organization started an NFT project to support the education of women in Afghanistan and Afghan refugees. Other social activists have sent cryptocurrency to Afghan girls in need. Many businesses pay their employees in cryptocurrency as well, like the CEO of Afghan Citadel Software Company, Roya Mahboob, who said: “If young people can learn about computers, they can learn about Bitcoin. And now everybody wants to learn how to access Bitcoin. They need to.”
With the Taliban cracking down on the central bank’s ban on digital assets, it’s unclear how many Afghan people will suffer and struggle to keep their businesses afloat and families fed.
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