Farhan Hotak, a crypto trader and vlogger, travels to Afghanistan's Shah Wali Kot District.
Farhan Hotak, a 22-year-old Afghan, is not your average 22-year old Afghan. He helped his family of ten escape Zabul, southern Afghanistan's province, and traveled 97 miles to reach a city near the Pakistani border. Hotak, unlike other people who leave, returned to Afghanistan to protect his family and to update his thousands of Instagram followers on the current situation in Afghanistan. Hotak has been closely monitoring his Binance crypto portfolio, since the local currency is at record lows and it's almost impossible to withdraw cash due to bank closings. Hotak said that in Afghanistan there are no platforms like PayPal, Venmo or Zelle. He has to rely on other resources. Hotak said that Afghanistan is still a cash economy. Although the money in Hotak’s crypto wallet will not help him make dinner tonight, it will give him some peace of mind knowing that some of his wealth has been protected against economic instability back home. It offers greater promises in the future: Access to the global economic system from Afghanistan, protection against spiraling inflation and, most importantly, the chance to bet on himself, and a future that he never thought possible before discovering bitcoin. "I don't have the resources to do anything. He said that he is interested in crypto because he has earned a lot and sees a lot in himself.
Banks are your friends
This week has shown Afghans the worst case scenario for a country that relies on its legacy financial system: A national cash shortage, closed borders and a plummeting currency. Prices of basic goods are also rapidly rising. After running out of cash, many banks had to close their doors this week. Pictures of hundreds of Kabul residents gathered outside banks in futile attempts to withdraw money from their accounts went viral.
Afghans line up at AZIZI Bank in Kabul to borrow cash during the Bank's money crisis. Anadolu Agency
Ali Latifi, a Kabul-based journalist, stated that "there's no bank I could go to right now," and added, "There's no ATM." Latifi said, "I live above three ATM machines and two banks, but they've been gone since Thursday." He was referring to Thursday prior to the palace ouster. It appears that printing money to make up the shortfall, even if there isn't a central bank authority, is not an option. Western Union has stopped all services. Even the centuries-old "hawala", which facilitates cross-border transactions through a sophisticated network involving money exchangers, personal contacts, and other financial institutions, is still closed. Sangar Paykhar is a Kabuli native who has been in constant contact with his relatives in the Netherlands for the past few weeks. Paykhar said that while many people who live paycheck-to-paycheck used to borrow money from others in order to survive, now those who are able to lend cash have begun to save their money. Paykhar said that they have realized that the regime is "broken" and that people they lend money to may not have a job tomorrow. Musa Ramin, who was waiting in line at a bank to withdraw cash just days before the Taliban invaded Kabul, was one of the many people queuing up. He had, however, invested some of his net worth in crypto, unlike the other Afghans who were waiting to be deposited. Ramin had already been burned by rapidly declining currencies, but decentralized digital currency had proved to be a reliable safeguard. Ramin was stuck in Turkey during a short layover on a journey from London to Kabul in 2020. One-week mandatory Covid quarantine quickly ballooned to six months. He said, "I converted all of my money to the lire." Ramin stated that his capital had been reduced in half after the Turkish currency spiraled. He was forced to preserve it. "That was when I discovered bitcoin." Ramin was left stranded in Turkey due to the pandemic-related shutdown and all his flights were cancelled. Ramin knew he had to find other ways to survive. He then started trading crypto. He said that he lost a lot of money at first. He's now able to manage his digital assets thanks to YouTube tutorials and Twitter.
Musa Ramin, shortly before his six-month quarantine to Turkey at the Royal Opera House, London.
The 27-year-old said that he still focused on trading crypto even after he returned to Kabul. His crypto capital consists of 80% spot exposure. This is primarily in major coins like bitcoin, ethereum and binance coin. He trades futures with the remaining 20%. Ramin stated that he made more money in crypto than in construction, but he acknowledged the risks involved. It's easy to make money in crypto, but it's hard to keep that wealth. Ramin believes crypto is the best place to store his money despite all that volatility. Ramin said that if a government is not formed quickly, there might be a Venezuela-like situation here. Ramin believes virtual tokens are his best hedge against political uncertainty. He plans to increase his exposure in the next year to as high as 40% of his net worth through digital currencies. Ramin's thinking is not unique. Google trends data shows that searches for "bitcoin", "crypto" in Afghanistan rose sharply in July, just before the coup in Kabul. This tool measures interest so the spike could refer to 10 searches or 100,000. In a country that relies on cash for almost all transactions, many people don't have the option of storing their savings in a bank account or digital wallet. Hotak is an example. Hotak lives in an area of Afghanistan without ATMs or branches. He must keep plenty of cash on hand to pay his daily expenses. He said that Afghanistan is an unpredictable country and that you need to be prepared for any eventuality. Hotak believes crypto is his future. However, for the moment, most of his income comes through day labor jobs like digging wells, shoveling bricks and operating a tailor shop that makes clothes.
"Zabul does not have a lot of development. He said that it's a village so that's how he earns.
There are signs of a growing cryptocurrency economy
It is difficult to gain insight into the adoption of cryptocurrency in Afghanistan. It is difficult to measure cryptocurrency adoption at the grassroots level. People also actively try to hide their identities. For example, some Afghans will use a virtual private network (or VPN) to hide their IP address and conceal their digital footprint. Contrary to many crypto boosters, who are often vocal and community-driven supporters of digital currency in Afghanistan, they don't want other people to know that they exist. Hotak said that the crypto community in Afghanistan was very small. They don't really want to meet one another." He believes that this could change if things improve politically, but for now everyone wants to keep their mouths shut until things get better. Chainalysis, a blockchain data firm, has released new information that reveals the country's burgeoning peer to-peer (P2P), crypto network. This is becoming the most important metric for Afghan adoption. Hotak and his friends use Binance's peer-to-peer (P2P) exchange. This allows them to trade their coins with other users directly.
Chainalysis' 2021 Global Crypto Adoption Index ranks Afghanistan 20th out of 154 countries. It is ranked in terms of total crypto adoption. Afghanistan rises to seventh position when you take out its P2P trade volume. Chainalysis ranked Afghanistan seventh in only 12 months. Last year, Chainalysis deemed Afghanistan's crypto presence so low that it had to completely exclude it from its 2020 ranking. Boaz Sobrado from London, a fintech data analyst, said that Afghanistan is on top because it's difficult to move money in and outside of Afghanistan. CNBC has been told by experts that Chainalysis may be underestimating its adoption. Sobrado explained that sanctioned countries don't have clear and accurate data about P2P markets like many other countries. Sobrado says this is partly due to the difficulty of tracking these transactions.
Afghan currency traders at the central money market in Kabul. Getty
Other anecdotal evidence points to adoption are also present in the country. A decade ago, two sisters from Afghanistan, Elaha and Roya, both entrepreneurs and computer scientists at Herat University, founded the Digital Citizen Fund. This NGO helps girls and women in developing countries access technology. There are 11 centers for women in Herat, and two more in Kabul. They teach 16,000 girls everything from basic computer skills to blockchain technology. The curriculum included the creation of a crypto wallet before classes were suspended earlier in the week. CNBC's Elaha Mahboob says that some students have started investing in bitcoin or ethereum to help them achieve their long-term financial goals. Mahboob stated that this is particularly important because they won't need to worry about losing their money as major banks in Afghanistan have shut down. CNBC has been told by Mahboob that some Digital Citizen Fund participants had left Afghanistan and used their crypto accounts to transfer their funds out. The presidential palace was also where Afghanistan's cryptosphere exposure took place. CNBC was told by Fantom, a blockchain company that had been working with the previous government. One of the projects with the Ministry of Health was piloting blockchain technology for counterfeit pharmaceuticals. Fantom claims that the pilot was "concluded successfully" and that they were preparing for a national rollout. Bitrefill is an online marketplace based in Sweden that allows customers to exchange digital coins such as bitcoin and dogecoin for gift certificates with merchants. The card options in Afghanistan include multiple mobile phone providers, games like Fortnite and Minecraft, Hotels.com and Flightgift. These cards can be used to redeem for international flights with over 300 airlines. Bitrefill doesn't disclose sales figures to CNBC. Janey Gak endorses Bitrefill, which she uses to recharge her phone. Her Twitter account is a must-follow if you want to see the world through her eyes. She's also spreading the gospel of the power and potential of bitcoin to transform the country. "I'm an ordinary person. She said that she is not someone special. "I'm just someone who discovered Bitcoin a few years ago." Gak, who goes by "Bibi Janey", created a Facebook page in 2018 as a hobby to find out what Afghans think about bitcoin. "I recall getting many comments and questions such as, 'Can I explain more?'," she said. She said. It would be fascinating to see, but people would be confused. There were many questions she had about buying bitcoin. She has been learning how to code since she entered the world. She said, "I don’t trade, I don’t do anything." "I make some money and then I save it in bitcoin. Her research has led her to conclude that Afghanistan must not borrow money or adopt a bitcoin standard to become a sovereign state. Gak orders articles to be translated into local languages to encourage wider adoption. She told CNBC that although it isn't much, it's a start.
DIY crypto rails
It is difficult to get into the Afghan crypto economy. There are many barriers. While internet access is growing, it remains very limited. According to DataReportal.com, Afghanistan had 8.64 million internet users as of January 2021. The internet penetration was at 22%. Power outages and unreliable electricity are another problem. Ramin said that power outages happen once a day for several hours, but it does occur in certain areas of Kabul more frequently than others. Hotak was sitting near one of the Pakistani land-crossings, tapping into the WiFi network. He explained that there is no internet access on the Afghan side. Hotak also charges his phone with solar power, due to the country's ongoing problem with electricity outages. Two essential elements for widespread adoption of crypto are electricity and stable internet connections. Access to online banking and a credit card that can be used internationally is also crucial. This is another problem facing many Afghans. According to a U.N. estimate, 85 percent of Afghanistan is not banked. This means that they don't have a bank account. People who want to trade in crypto need to be creative. Hotak and his contacts seek the support of their family and friends in Pakistan and the Gulf of Oman, the United Arab Emirates. They have greater access to global markets and are more familiar with the people they know. He said that it was very simple in Pakistan. "Most people have relatives living in Dubai who purchase crypto for them with their credit cards." The person will then be able to sell their crypto stake and transfer funds to Afghanistan using the hawala system. This honor-based credit system is common in Asia and Middle East. This strategy requires trust. Hotak's friend in Pakistan doubles up as his crypto broker. Hotak is a very close friend. Hotak stated that he has his details on the account I use so we could say it's his, but I use it."
Near the Iran border is the Salma Hydroelectric Dam, Herat, Afghanistan. Getty
When it comes to judging quality trading tips, trust is key. Ramin warned that there are many scammers on Twitter and YouTube. Ramin used to spend his first start-up money on coins that were promoted by people seeking exit liquidity. "That's why i stopped trading small-cap coins. Hotak has, however, found an online community that provides sound trading advice. Hotak says that he follows a number of groups on Telegram and WhatsApp. There's also a Pakistani group on Facebook that I follow, which gives him the signals to buy. Hotak said that he follows them and it's been great so far. There are brokers advertising crypto services on Facebook that appear to be operating all over the country. Hotak visited one at Herat in the early 2020. Hotak went to interview for the job and said that the two-story data centre was crowded with boys between 20 and 25. He said, "They were all university students." "They had all got smartphones and were scrolling down and up." CNBC hasn't spoken to any brokerages, but Hotak claims that the Herat site he visited is still operating. Hotak claims that Herat is also home to a Bitcoin mining farm. They had very powerful CPUs. He said that it was very advanced. CNBC's Hotak says he did not see the whole operation. "I only got a small glimpse of it." Blockchain analysts Lorne Piscano and Rieya Piescano said they examined various data sources but found no evidence of bitcoin or ethereum nodes in Afghanistan. It is not clear if this Herat miner has covered his online footprint or if he's taken down his rigs. Despite all the workarounds, it is difficult to find the time to think about crypto despite the political turmoil in the past few weeks. Hotak stated, "The truth is that I can't focus on crypto trading while the ongoing events are in Afghanistan." "With no electricity or internet, crypto trading can be almost impossible so we just keep our fingers crossed."
Farhan Hotak, a crypto trader and vlogger from Herat in Afghanistan.
The path to mass adoption
The former President Ghani arrived at Kabul's airport on Aug. 15, just an hour before Ramin's flight to Turkey. Ramin claims that all flights were stopped and that everyone was expelled. Ramin and his family still have plans to go. Finding a flight is difficult. His now depleted afghani reserves have allowed him to buy flights for ten family members. This he's done three times and the flights were cancelled each time. He is now stuck in Kabul, in a somewhat holding pattern due to the closure of travel agencies. Ramin is just one of many who are looking to flee the country. Every media outlet has circulated the same images of Afghans fleeing Afghanistan with all their possessions. This has meant that many people have had to leave behind a lot. Ramin estimates that between 5-10% of his net wealth is in crypto. This makes it easier for him to plan his exit. He also has some money in the bank to help him get through, even though he isn't sure if he'll ever see the money in Kabul. He said, "If any type of government is not created, then I could potentially witness the majority of my wealth being destroyed." He and his family are waiting for a flight to fly out, so they're just waiting. Many people stay put because they want to make positive changes at home. "In these circumstances, one can fully appreciate the censorship-resistance property of blockchain-based assets. Andrea Barbon, assistant professor of finance at the University of St. Gallen, said that this is what I believe is the primary driver of bitcoin's fundamental value and other cryptos. Gak believes that legacy financial rails such as the hawala system could be one of the best ways to encourage mass adoption. She outlined her vision in a 2018 Hacker Noon story. She is also considering opening her own currency exchange in Kabul. The idea is that anyone who has bitcoin can convert it to fiat, and then use it to purchase goods as usual. She explained that anyone who is unable or unwilling to receive bitcoin can have their family, for example, send it to me with a unique address that only they would know. Ramin also has a similar plan for making crypto more accessible to Afghans. He stated that he hopes to be able to form a team and create an accessible trading platform for Afghans once I have more knowledge about blockchain technology. They are seeing promising trends. According to DataReportal.com, the number of Afghans using social media increased by 22% between 2020 and 2021. 68.7% of Afghanistan's total population has a phone line, which is a significant increase. This is due to the fact that 60% of Afghanistan's population are under 25 and hungry for a modern economy. Shakib Noori was previously the CEO at a mobile money company in Afghanistan. He says that this younger generation is also more tech-savvy. CNBC reports that grassroots adoption is a result of one Afghan sharing information about cryptocurrencies such as bitcoin. Hotak mentored three students already, and that's only the beginning. "The Afghan people are very complex. He said that it was very difficult to convince them digital currency exists. "I have plans for teaching people cryptocurrency in the future...but right now people are just waiting and watching to see what happens next."
