New Country, New Currency: Will the Taliban Government Accept Cryptocurrencies?

Within weeks, the 20-year war in Afghanistan ended and the Taliban took power again. However, the cryptocurrency community wonders if the Taliban government will embrace cryptocurrencies as it rebuilds the economy.

Fast as lightning

After the US military announced it was withdrawing from Afghanistan, other Western allies like Britain announced they would do the same. In May, the Biden Administration began withdrawing US troops from Afghanistan, leaving the original military bases to the Afghan army. The world was shocked, however, when the Afghan military, which the US government said was well trained and equipped, offered almost no resistance to the Taliban advance.

On August 5, the Taliban captured their first city, Zaranj, in the southwestern part of Afghanistan, right on the border with Iran. Thereafter, the remaining Afghan cities fell into Taliban hands in rapid succession. By August 15, they had captured the city of Jalalabad, 80 miles from the capital, leaving Kabul the only Afghan city in government hands that was surrounded by Taliban fighters. On August 16, the Afghan president fled the country, marking the end of the 20-year war.

A battered economy

As a result of the ongoing armed insurgency in the country, Afghanistan's economy is one of the worst in Asia. According to the latest report from Asian Development Bank, 47.3% of Afghans live below the national poverty line, the unemployment rate is over 10%, and a growth rate of just under 4% was expected in 2021.

The world continues to be shocked as the former president has fled. A spokesman for the Russian embassy told Reuters news agency that the former president left in a helicopter and four cars loaded with cash. As the Taliban closed in on Kabul, hundreds of thousands of Afghans camped out in the city after their hometowns were captured by the Taliban and flocked to banks and ATMs to withdraw their savings, fuelling inflation. Afghanistan's inflation rate is estimated at 5.61% in 2020, but given the current situation, this figure will undoubtedly rise.

Will cryptocurrencies catch on in Afghanistan?

The Afghan currency fell 1.7% on Tuesday, shortly after the Taliban took over the country, and the economy is on the verge of collapse. Shortly before Acting Governor of Da Afghanistan Bank (DAB) left on Sunday, the bank was ordered not to make any more dollar deliveries, causing unrest in the banking sector.

Although unknown to many people, the first Bitcoin transaction in Afghanistan took place in 2013, and just two months before the Taliban took power, the Afghan Ministry Ministry of Health had signed a contract with a blockchain company to help monitor medical supplies to prevent counterfeit drugs from entering the country.

In 2015, Fereshteh Forough founded Coding to Inspire (CTI), the first coding school for Afghan women. Through a partnership with Bounties Network, the women trained by Fereshteh's project were already earning ether to carry out projects that many feared the new government, with its strict Sharia laws, would crack down on.

The Taliban's conquest of Afghanistan is fraught with uncertainty due to the reimposition of strict Sharia laws. Human rights activists predict difficult conditions for Afghan women, while economists worry about the future of the Afghan economy. Cryptocurrency advocates say the introduction of cryptocurrencies in Afghanistan is long overdue. It is unclear whether the new government will support cryptocurrencies or not. One factor that could potentially force the Asian country to get into crypto and blockchain innovation is Western sanctions should it impose harsh rules on the population.

Iran has found safety in cryptocurrencies after facing tough sanctions from the US, while Venezuela's Petro token was developed to facilitate oil trade amid US sanctions, according to CoinIdol, a world blockchain news outlet.

On the other hand, cryptocurrencies have long been used to finance terrorism due to their anonymity. Since the Taliban is considered a terrorist movement by many countries, including Russia, Canada, Turkey, and members of the UN, they are likely familiar with cryptocurrencies. This, combined with the fact that the new government will have to overcome tough sanctions, suggests that they will at least be involved with cryptocurrencies. However, this might not facilitate the adoption. On the contrary, it could strengthen the criminal reputation of cryptos and thus reduce trust in them.