Cash remains irreplaceable: Afghans rely on Bitcoin during the crisis

Cash remains irreplaceable
Afghans rely on Bitcoin during the crisis

Offering a stable alternative in financial crises is one of the central promises of Bitcoin advocates. In Afghanistan, the number of those who rely on this alternative has skyrocketed. In everyday life in the desperately poor country, however, virtual assets are of little help.

Queues, some kilometers long, in front of the banks in Kabul have become a symbol of the feared collapse of the already weak Afghan economy. Afghans rely on cash in the local currency Afghani or in US dollars for all of their daily business. But the bills are scarce. The financial system could only be kept alive in the past few years by the constant importation of dollar bills by the central bank. It is unclear whether and how the Taliban can save the entire economy from collapse without the help of the Americans.

In the months before the Taliban’s triumphant advance, more and more Afghans tried to secure their assets with the help of cryptocurrencies. According to data from Chainalysis, the use of digital currencies in Afghanistan has skyrocketed. In the current “Global Crypto Adoption Index”, which compares the distribution of crypto currencies worldwide, the desperately poor country is now in 20th place. A year ago, crypto activities in Afghanistan were so low that it did not even appear in the index. For transactions directly between users, so-called peer-to-peer transactions, Afghanistan even ranks seventh. According to Google, just before the fall of Kabul to the Taliban, the number of searches for “Bitcoin” or “Crypto” rose again.

Offering a safe alternative in times of economic collapse is one of the central arguments of the advocates of Bitcoin and other cyber forex. In Afghanistan there are now advantages and disadvantages of cryptocurrencies. Video blogger Farhan Hotak has also invested and increased part of his money in crypto currencies. The credit in a wallet, a digital memory, gives him the certainty that his assets are at least partially protected against the insecurity in his own country, quoted the US television broadcaster CNBC Hotak.

Alternative to the “devilish” dollar

In everyday life in his home village in the province of Zabul, however, he cannot use the virtual assets. Groceries and all everyday goods are sold here exclusively for cash. An exchange of cryptocurrencies for Afghanis or dollars is hardly possible in the remote region. Despite considerable profits from his crypto trading activities, he is dependent on making cash with construction jobs, among other things. Conversely, it is hardly possible for most Afghans to exchange their cash assets in the country for crypto currencies in order to protect them from an impending depreciation of the Afghani.

According to accounts by Afghans on Twitter, the first money transfer offices in Kabul that work with the traditional hawala system are offering Bitcoin transfers from abroad in local currency. As in many poor countries, remittances from Afghans abroad play an important role at home for many of their families at home. But branches of international companies such as Western Union in the country, as well as most banks, are closed.

It is difficult to predict whether the role of cryptocurrencies in Afghanistan will continue to grow under the Taliban. It is unclear how much control the new rulers can gain over the economy and the financial system. The Islamists are currently doing everything they can to convince the international community, and above all the USA, to continue supporting Afghanistan financially and not to depend on the global financial system. In the social networks, however, some of their supporters are already loudly calling for a Bitcoin-based currency to be created as an alternative to the “devilish” dollar.