Afghans turn to cryptocurrencies amid US sanctions

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Since the Taliban takeover, US sanctions, failing banks, and the drying up of foreign aid and cash transfers have left Afghanistan's economy in tatters. It is going to be a rescue.

After the Taliban takeover in August last year, 22-year-old Farhan Hotak from the province of Zabul in southern Afghanistan was left with no cash in hand.

Mr Hotak used a virtual wallet to hold a few hundred dollars of the digital currency. Hotak fled to Pakistan with his family after turning it into a traditional currency.

He said after the Taliban takeover that there was almost no other way to receive money.

Mr Hotak and his friends use the P2P exchange to buy and sell their coins. Mr Hotak is back in Afghanistan after he found a temporary refuge in Pakistan and is teaching people about cryptocurrencies.

Fans of cryptocurrencies say they will stop people from having to rely on banks. In Afghanistan, the banks have stopped working and people have turned to cryptocurrencies to survive.

The number of web searches for "bitcoin" and "crypto" in Afghanistan increased in July just before the Taliban took control of the country.

After the Taliban takeover in August of 2021, the use of digital currency soared. Chainalysis gave Afghanistan a ranking of 20 out of 154 countries it evaluated in terms of their adoption of cryptocurrencies.

Afghanistan was considered to be so minimal in itscrypto presence that it was excluded from its ranking.

The US sanctions against the Taliban and the Haqqani group resulted in the creation of HesabPay, an app that helps Afghans transfer money using digital currency.

Transactions with Afghan banks have stopped because of the sanctions. The US has taken $7.1b worth of assets from the Afghan central bank. The Afghan currency was printed by companies in Poland and France.

The Swift system, which underpins international financial transactions, suspended all services in Afghanistan.

Commercial banks were unable to lend money and retail customers were not allowed to take their own money out of banks.

Afghanistan's economy was left on the verge of collapse because 80% of its GDP came from foreign aid.

There are 22.8 million Afghans who are marching toward starvation, including one million children that might starve to death this winter, according to Mr. Kakar.

instant transfers of funds from one phone to another without touching banks, the Afghan government, or the Taliban is possible with an app like Mr. Kakar's HesabPay. The app had over 2 million transactions in the three months since it was launched.

Aid organizations have seen the potential in Afghanistan.

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Roya started Digital Citizen Fund to teach computer programming and financial literacy to young Afghan women. 16,000 women were taught everything from Windows software to robotics at the 11 women-only IT centres in Herat and two in Kabul.

After the Taliban takeover, the group focused on training young women via video calls.

The Digital Citizen Fund started sending money to Afghan families via the internet to help them provide food and housing, as well as to help people get out of the country.

The last six months have seen the criticality ofCrypto for Afghanistan. Everyone is talking about trading. It got to a point where I got on a plane to Kabul and people were talking about Dogecoin and other things.

Gaining ground in Afghanistan are thestable coins, which are virtual coins pegged to the US dollar. The stable coins are converted to the local currency at money exchanges.

They can be sent directly to recipients without a bank account.

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There are obstacles that make it harder for an average Afghan to access cryptocurrencies.

While internet access is growing, it remains low. In January of 2021, there were 8.64 million internet users in Afghanistan.

Power outages are a major issue. The new Taliban rulers have been accused of not paying their electricity suppliers. Many Afghans don't have the means to pay their power bills due to the banking system being paralyzed.

When it comes to cryptocurrencies, education is very important. Mr Hotak said he found online communities that gave him trading tips and advice. There is a lot of misinformation online.

Despite the steep learning curve and several barriers to entry, Afghanistan is seen as an improvement on the status quo.

He said that cryptocurrencies are not a silver bullet. A senior advisor at HesabPay. He said that it was crucial to alleviating the growing poverty in Afghanistan.

It is the failures of the traditional centralised system that are starving Afghanistan.

In February, US President Joe Biden signed an executive order splitting $7 billion in frozen Afghan funds between aid for Afghanistan and US victims of 9/11, who in 2010 sued the Taliban and al-Qaeda for their role in the attack.

The executive order doesn't specify how the money will be released, despite reports that the other half of the frozen Afghan foreign reserves will be directed to humanitarian groups.

The United Nations warned that the poverty rate in Afghanistan could reach a near-universal level by the middle of the next decade. The country is on the verge of famine.

We want the US sanctions to be lifted so we can trade and see our families. Mr Hotak said that they want the frozen funds to be given to the families in Afghanistan.