The Underground Economy: Afghanistan's Turn To Bitcoin

Afghanistan has seen a surge in the use of cryptocurrency, particularly Bitcoin, as a deepening financial crisis takes hold following the Taliban's takeover. With banks not working, people have turned to crypto not just to trade but to survive.

Afghans have been using crypto to send and receive money in and out of the country, with some women, who are not allowed to work, using it as a source of income. Crypto has also been used to send money to those who have fled the country.

Roya Mahboob, the first female Afghan tech CEO, has been promoting Bitcoin in Afghanistan since 2013 and sees it as necessary for her home country now more than ever. She has helped thousands of women in the Herat area learn about Bitcoin and attain more financial freedom.

However, there are concerns about the use of crypto in Afghanistan, with Western security officials worried about the potential for the Taliban to use it to circumvent sanctions.

The rise of crypto in Afghanistan

A financial lifeline

The Taliban takeover of Afghanistan has fuelled a surge in the use of cryptocurrency as Afghans grasp for ways to cope with a deepening financial crisis. The appeal of cryptocurrency grew as Afghans saw it as a safe place for their funds and as digital-currency transactions continued in the wake of the Taliban's seizure of power. Western governments, banks, and money service businesses cut off access to other forms of finance, leaving Afghans with little alternative.

A way to escape sanctions

If the Taliban were to adopt cryptocurrency as part of a national economic policy, it could aid efforts to circumvent sanctions. Roya Mahboob, the first female Afghan tech CEO, has been promoting Bitcoin in Afghanistan since 2013 and sees it as needed now more than ever. She has helped young women learn about Bitcoin and attain more financial freedom.

A way to send money in and out of the country

Apart from the Hawala system, an informal money-transferring service popular across the Middle East and South Asia, crypto has become one of the only ways to reliably send money in and out of Afghanistan. Crypto is also being used by local businesses to process international transactions, particularly in countries where Hawala isn't available.

A way to protect wealth

For many Afghans, crypto is a way to protect their wealth against economic instability at home. Musa Ramin, for example, invested a portion of his net worth into crypto after being burned by a rapidly depreciating currency. Crypto allows Afghans to access the global economy from inside the country and offers some protection against spiralling inflation.

A way to support humanitarian efforts

Aid organisations have also caught on to crypto's potential in Afghanistan. Roya Mahboob's Digital Citizen Fund, for example, started sending money to Afghan families via crypto to help them provide food and housing, and in some cases, to help people get out of the country.

A way to access the global economy

Afghanistan still mostly operates as a cash economy, but crypto offers Afghans access to the global economy from inside the country. Crypto trader and vlogger Farhan Hotak says:

> "In Afghanistan, we don't have platforms like PayPal, Venmo, or Zelle, so I have to depend on other things."

A way to gain financial independence

For young Afghan women, crypto is a way to gain financial independence. Pashtana Zalmai Khan Dorani, who runs the STEM program LearnAfghan, says:

> "We're trying to give them soft skills on crypto and STEM, anything that will help them become their own leaders, become their own people."

Bitcoin as a financial lifeline

Roya Mahboob, the first female Afghan tech CEO, has been promoting Bitcoin in Afghanistan since 2013. She believes that Bitcoin is needed in her home country now more than ever.

In Afghanistan, Roya Mahboob founded the Digital Citizen Fund, an NGO that helps women and girls in developing countries gain access to technology. The organization has 11 women-only IT centres in Herat and another two in Kabul, where they teach 16,000 females everything from essential computer skills to blockchain technology.

In 2013, Roya Mahboob started paying her staff and freelancers in Afghanistan in bitcoin. She found that it was easy to use, cheaper, and more secure than other options. Mahboob taught the girls how to use it and began to pay her staff and contributors with it. She told them it was an investment for the future.

In 2021, Roya Mahboob's Digital Citizen Fund started sending money to Afghan families via crypto, to help them provide food and housing, and in some cases, to help people get out of the country.

After the Taliban takeover in August 2021, the use of crypto rose sharply. Crypto is coming to the rescue in Afghanistan as US sanctions, failing banks, and the drying up of foreign aid and cash transfers have left the country's economy in tatters.

Cryptocurrency is a small but critical financial lifeline amid a cash crunch in an economy racked by political crisis. It has provided Afghans with a safe place for their funds and as digital-currency transactions continued in the wake of the Taliban’s seizure, while Western governments, banks and money-service businesses cut off access to other forms of finance.

Grassroots nonprofits are doing their best to offer assistance. They are currently assisting some 20,000 Afghan citizens still in the country waiting for United States authorities to process special immigrant visas. These nonprofits are currently accepting Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Zcash (ZEC), Gemini dollar (GUSD), Balancer’s BAL, Yearn.finance’s YFI, Polygon’s MATIC, Synthetix Network Token (SNX) and Bancor Network Token (BNT).

Women and crypto in Afghanistan

Roya Mahboob, the first female Afghan tech CEO, has been promoting Bitcoin in Afghanistan since 2013. She is also the co-founder of the non-profit Digital Citizen Fund, which teaches young women in Afghanistan about computer programming and financial independence.

In 2013, Roya and her sister Elaha started paying their Afghan employees and freelancers in Bitcoin. Roya and Elaha had to teach the girls how to set up a crypto wallet and receive money. The Mahboob sisters also had to explain the concept of cryptocurrency to the women, many of whom had never had access to traditional banking services. Roya and Elaha also had to convince the women that cryptocurrency was a safe way to store their money.

The Taliban's takeover of Afghanistan in August 2021 caused the country's economy to collapse. Banks closed, foreign aid was suspended, and the local currency lost value. This left many Afghan women, who were already prohibited from having bank accounts, without access to their money. Roya and Elaha's decision to pay their employees in Bitcoin allowed them to access their money and even leave the country.

Fereshteh Forough, the founder of the coding school Code to Inspire in Herat, Afghanistan, has also been sending her students cryptocurrency as emergency aid. She told Insider that her students' families were going hungry because they couldn't withdraw cash from the banks. Forough helped 100 of her neediest students create Binance accounts so that she could send them money.

Cryptocurrency has become a critical lifeline for women fleeing Afghanistan. Roya Mahboob reflected on her work, saying:

> "The traffickers and kidnappers will always find a way to abuse a system. But the power of crypto is bigger – especially for women and those who don’t have bank accounts, it is very beneficial and so empowering."

Crypto as a tool for financial freedom

Cryptocurrency is a powerful tool that can be used to achieve financial freedom. It allows users to leverage their money and increase their purchasing power. With the global economy becoming increasingly digital, cryptocurrency offers an opportunity for people to take control of their finances and secure their wealth in new ways.

The cryptocurrency market is continually growing, and it is estimated that it will continue to grow in the coming years. This growth brings with it unprecedented opportunities for people to use crypto as a secure form of investment. By investing in crypto, individuals can diversify their portfolios and protect themselves from economic downturns. Crypto also offers potential financial opportunities through trading or using crypto-backed loans.

One of the main advantages of crypto is its decentralized nature. Cryptocurrencies run on decentralized networks, also known as blockchains, which means they are not controlled by centralized entities such as banks or governments. This gives people more authority and control over their crypto interest accounts. They can operate as their own bank, sending, receiving, and storing digital assets without the need for intermediaries. This independence also lowers transaction costs and ensures immutability, security, and transparency.

Another benefit of crypto is its ability to facilitate borderless transactions and financial inclusion. Cryptocurrencies enable frictionless cross-border transactions without the restrictions of conventional banking institutions. Traditional international transfers can be slow, costly, and reliant on multiple middlemen. Crypto offers a borderless and immediate means of value transfer, enabling international trade and empowering people in underserved areas.

Additionally, crypto can help increase financial inclusion by providing a straightforward and approachable way to participate in the global financial system. In many regions of the world, people lack access to fundamental financial services due to a lack of infrastructure or excessive pricing. Cryptocurrencies can bridge this gap and provide an opportunity for financial inclusion.

Crypto also offers investment opportunities and wealth generation. Early adopters of cryptocurrencies have amassed significant wealth, and the spectacular price increases have received a lot of media attention. While crypto can be unpredictable, it has provided excellent returns over the past decade, giving people the chance to accumulate wealth.

Furthermore, the development of decentralized finance (DeFi) has been made possible by cryptocurrencies. DeFi platforms utilize blockchain technology to offer innovative financial services such as lending, borrowing, and earning interest on crypto assets, eliminating the need for middlemen. DeFi creates new opportunities for generating wealth and achieving financial independence.

Crypto also provides enhanced privacy and security compared to traditional financial systems. Cryptocurrency transactions are recorded on the blockchain, but personal information is often kept private, protecting individuals from financial fraud and identity theft. Additionally, cryptographic methods ensure the security of crypto transactions, making them tamper-proof and hacker-proof.

However, it is important to approach crypto investments with caution and conduct thorough research. While crypto offers immense potential for financial freedom, it also comes with risks and volatility. Individuals should educate themselves about the crypto market and carefully consider their investment strategies to make informed decisions.

In conclusion, cryptocurrency has the potential to be a powerful tool for achieving financial freedom. By leveraging its decentralized nature, borderless transactions, investment opportunities, and enhanced privacy, individuals can take control of their financial lives and secure their wealth. However, it is crucial to approach crypto with a cautious and informed mindset to fully utilize its potential.

Crypto as a way to bypass sanctions

Cryptocurrency has become an increasingly popular way to bypass sanctions. Its decentralised nature, lack of regulation, and anonymity make it an attractive prospect for those looking to evade sanctions. However, it is not a foolproof method, and there are ways to track and prevent such transactions.

The Use of Crypto to Bypass Sanctions in Afghanistan

Following the Taliban takeover of Afghanistan, the country's economy was left in tatters. US sanctions, failing banks, and the drying up of foreign aid and cash transfers severely impacted the country. Afghans were left with no cash on hand and turned to cryptocurrencies as a way to receive and send money. Crypto offered a way to bypass the frozen bank accounts and the inability to withdraw cash.

The use of crypto in Afghanistan has been further fuelled by the lack of access to other financial services. The country still operates largely as a cash economy, and money transfer services such as Western Union and the centuries-old "hawala" system have been closed. Additionally, Afghanistan does not have access to platforms such as PayPal, Venmo, or Zelle, further limiting the options for its citizens.

The increase in crypto usage in Afghanistan has been significant. Google Trends data shows that web searches for "bitcoin" and "crypto" in Afghanistan rose sharply before the takeover in Kabul. The peer-to-peer (P2P) crypto network is also growing, with Afghanistan ranking 7th in the world in terms of P2P exchange trade volume.

However, there are several barriers to crypto adoption in Afghanistan. Access to the internet and reliable electricity is limited, and most of the population is unbanked. Additionally, there is a lack of financial literacy and understanding of crypto among the population.

The Taliban's Response to Crypto

The Taliban has not explicitly banned the use of crypto in Afghanistan. However, they have cracked down on money exchangers dealing in USDT, mistaking it for a day trading firm. There are also concerns that the Taliban could shut down financial modernisation plans and local businesses, further limiting access to financial services.

The Future of Crypto in Afghanistan

Despite the challenges, crypto is likely to continue playing a role in Afghanistan's economy. It offers a way to bypass sanctions and access the global economy, protect against inflation, and provide financial freedom, especially for women.

The use of crypto in Afghanistan highlights the potential for crypto to be used as a tool to evade sanctions. However, it is important to note that there are also risks and limitations to this approach.

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