How Crisis-Hit Afghans Are Using Crypto To Pay For Daily Needs

The people of Afghanistan have reportedly turned to cryptocurrencies to tide over the financial crisis that struck following the Taliban’s occupation of their country last August. From cash shortages to the shutdown of banks and other financial institutions in an economy that depends primarily on cash transactions, the list of troubles was unending. With non-governmental institutions like the Western Union and SWIFT stopping operations, the only way out for them to transfer funds seemed to be cryptocurrencies.

“We can’t get money through banks, but 88 percent of Afghan families have at least one smartphone,” said Kakar.

The rise of crypto in Afghanistan

“Afghanistan on top makes sense from a capital controls point of view, given it’s hard to move money in and out,” explained Boaz Sobrado, a London-based fintech data analyst, while talking to CNBC.

Google Trends also supports the notion of crypto gaining ground in the country. Data shows, in July 2021, before the occupation, there was a significant rise in web searches for ‘crypto’ and ‘bitcoin’.

There is anecdotal evidence that supports the rise in crypto popularity too. Ali Rahnavard, a crypto dealer and trader in Herat, one of the largest cities of Afghanistan told Cointelegraph he saw a monumental increase in people trading cryptocurrency and that his customer base had also increased tenfold in the last year.

“The main reason behind this growth is that people needed to find a way to receive money from their family and friends who live in other countries,” Rahnavard told Cointelegraph. “It’s much cheaper and faster than the previous payment systems like Western Union,” he said.

Donations in crypto

During the coup, the Taliban restricted bank withdrawals to retaliate against the sanctions from the US. Due to this, people could not access basic amenities, even putting food on the table had become a struggle. This led to substantial attention from international media outlets, and with it came donations.

Donations from NGOs and other organizations started pouring in. However, due to the restrictions imposed by the Taliban, getting access to these funds was difficult, if not impossible. This is when NGOs started turning to crypto donations.

Fereshteh Forough, founder of ‘Code to Inspire’, an NGO that taught Afghan women how to code, started sending cryptocurrency to the academy’s graduates. Forough detailed her experience in a Cointelegraph article.

She explained that before the coup, the girls who graduated from the academy landed jobs and were able to provide for their families. “After the coup, the girls texted me that they had lost their jobs because of the Taliban’s policies,” Forough said. “And, as the sole breadwinners, their families were falling apart.”

Forough then came up with the idea of sending crypto to the girls. “We found that actually, there are a bunch of local money exchangers in the financial district of Herat that is accepting crypto, and they can cash it out for you in either Afghanis or Dollars,” Forough said.

She helped the girls create Binance and Trust Wallet accounts to receive and exchange their digital assets for local currency.

Several other NGOs and humanitarian organizations were hampered by sanctions imposed on the country. They also feared informal money traders that might be tied to drug trades. Therefore, the only viable option remaining was crypto.

How is crypto used in Afghanistan?

Some Afghans started using Virtual Private Networks (VPNs) to mask their geographical location and IP address to make trades. This is a common practice, even outside of Afghanistan. However, Afghans have reportedly found another unique medium to exchange their crypto for fiat currency and vice-versa.

Last year, Binance announced that it would cease SWIFT Bank transfers for user accounts in Afghanistan. This made it difficult for Afghans to withdraw or deposit crypto from the exchange. To circumvent this restriction, crypto dealers started popping up, where customers pay in Afghanis, or US dollars to get crypto.

The dealer would contact someone abroad to send crypto to his wallet and use the local Hawala system to deposit the same amount in the sender’s bank account. The dealer would then ask for the customer’s wallet address and send the crypto to them, primarily Tether.

As for now, the Taliban has not banned cryptocurrency trading in the country. But that can change at a whim as the Taliban’s approach towards any policy has been scattershot.