The run on banks in Afghanistan is proving dramatic, a scenario that makes it the perfect environment for the rise of Bitcoin. But it is not so obvious that this will happen.
Bitcoin as salvation
Since the Taliban have regained power, they are restricting personal freedoms. One of these is the use of money. Many banks have been closed, others are functioning, but Afghans are allowed to withdraw no more than 200 dollars a day.
For those who are trying to flee, this is a derisory sum.
It is in this scenario that Bitcoin is emerging as an “alternative” currency as it is not subject to government control.
However, a trader tells CNBC, this crypto community is currently very small. Those who have cryptocurrency wallets prefer to stay hidden, even though it can be very difficult for the Afghan authorities to get hold of the wallets, precisely because of their decentralised nature.
The situation in Afghanistan
After the announcement of the withdrawal of the US army from Afghanistan, the Taliban gradually took power again. The incumbent president left the country, effectively delivering it into the hands of the extremist group that declared the restoration of the Islamic emirate.
This generated chaos and concern. Pictures of citizens amassing at the Kabul airport and handing over their children to Western soldiers have gone around the world. Many tried to escape, even clinging to planes as they took off.
The economic crisis as well as the political one
The Taliban’s seizure of power has not only affected the international geopolitical context, but also the economy.
After the conquest of Kabul, the main providers of cross-border payments, such as MoneyGram and Western Union, stopped their services. Currency trading was also interrupted, which could lead to a collapse in the value of the local currency.
This mix of factors has severely reduced liquidity in the country, with the consequences described above: banks are closing or making it difficult to withdraw money.
The Bitcoin solution for Afghanistan
In this scenario, Bitcoin could be the solution to shelter from low liquidity, galloping inflation, and government control.
At the moment, however, it is not necessarily viable because the use of Bitcoin requires an internet connection as well, and it seems that the Taliban are cutting off that too, particularly in areas where their control is not complete. By eliminating the connection, communication between insurgents is hindered.
It also curbs the use of alternative currencies, such as cryptocurrencies, which require a connection to operate.
The story of Ali, as told by Reuters, shows that the internet is necessary. The young man was starting a business mining bitcoin and Ethereum. The cut-off of his internet connection forced him to revise his plans and plan an escape, elsewhere.
“There is no internet. If there is no internet, I cannot do my job there. If we had smart phones that had a camera, the Taliban wouldn’t allow it”.
It is from this dramatic sentence that one can see how the Bitcoin solution risks not being viable. But given its independent nature, it is to be expected that the crypto community in Afghanistan, even if small and hidden, will do all it can to stay active and keep its digital currency capital.
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