Is Afghanistan's Financial Chaos The Perfect Test Case For Usefulness Of Cryptocurrencies?

After the fall of Kabul in August 2021, many Afghans turned to cryptocurrency, particularly Bitcoin, as a means of escaping the country. The digital assets proved to be lifelines especially for women fleeing Afghanistan, who were not permitted to open bank accounts in the country. While Afghanistan's currency plummeted after the Taliban captured Kabul on August 15, cryptocurrencies have aided many people in relocating, evacuating their families, and establishing new lives in other countries. The pioneers in helping women of the country achieve financial independence were two sisters — Roya Mahboob and Forough Mahboob.

Had it not been for them, many Afghan women would have been in a precarious position in terms of evacuating or assisting their families to flee. The sisters taught hundreds of young women computer basics in Herat and Kabul through their non-profit organisation, Digital Citizen Fund. Apart from that, they also taught the women how to use Bitcoin and paid their employees in the digital currency, stated a Reuters report. The women also learnt how to invest and trade in Bitcoin and Ethereum.

Even as Bitcoin's value soared to new highs in 2021, it was increasingly embraced by many people without access to official banking, those living in conflict zones, and those residing in countries with poor governance. However, the most ardent of cryptocurrency followers are emerging from countries like Afghanistan, where many people do not have bank accounts or banks are closed for long periods of time, and the local currency has plummeted. In fact, blockchain data firm Chainalysis put the country 20th in the Global Cryptocurrency Adoption Index 2021.

Many Afghans who have relocated to other countries as a result of the Taliban-led disruption last year rely a lot on profits gained from cryptocurrency transactions to meet their daily requirements. Locals in the country are equally hopeful that cryptocurrencies can save them from the current financial crisis.

Farhan Hotak, a 22-year-old Afghan, for example, sees cryptocurrencies as a protection against inflation. He has been keeping a close eye on his cryptocurrency portfolio in one of the major exchanges since the Taliban took over in August 2021, which led to a nationwide cash shortage, shut borders, and plunged the local currency.

Hotak first heard about Bitcoin in 2019, according to a report in Thomson Reuters Foundation. During the COVID-19 shutdown in 2020, he spent much of his time online and began investing. As he began making money, he started following other cryptocurrency users and invested in coins such as Matic, XRP, and xHunter. Though his holdings won't help him put food on the table, he may rest assured that portion of his wealth is protected from economic downturn.

According to a CNBC report, the pandemic-induced lockdown provided an opportunity for another Afghan citizen, 27-year-old Musa Ramin, to embrace cryptocurrencies. He got stuck in Turkey in 2020 during a brief layover on a flight from London to Kabul. As all flights were cancelled due to the lockdown, he had no way out of Turkey. He realised he needed to find other means to support himself while stranded there. So, he began trading cryptocurrencies. He initially lost a lot of money, but thanks to Twitter and YouTube tutorials, he learned how to manage his digital assets.

So, even as the digital currencies are proving to be a lifeline for many Afghans, it would be too early to predict the future of cryptocurrencies in the country in the wake of the current turmoil.