When the Taliban rose to power again in August 2021, Afghanistan faced global sanctions which caused several international organizations and financial transaction services to cease operations in the country. This has made it possible for cryptocurrencies and stablecoins to be widely used, at least for sending or receiving remittances.
However, according to regional news website ATN-News, the Taliban government recently banned cryptocurrencies and arrested 16 local exchanges in the northwestern city of Herat last week.
According to the report, the exchanges were initially given a grace period to comply with government regulations but were eventually shut down after not doing so. The Afghan government has now asked local residents to refrain from using digital assets and warned them about the risks associated with such activities.
However, people familiar with the matter – who want to remain anonymous for security reasons – told Cointelegraph that “no previous announcement or warnings have been given”.
Bank Da Afghanistan (Central Bank) stated in a letter that cryptocurrency trading has caused a lot of problems and deceives people, so they should be shut down. “We have acted and arrested all the money changers involved in the business and closed their stores,” Syed Shah Saadat, head of the crime-fighting unit in Herat Police, told ATN News.
People familiar with the matter believe that there were no cryptocurrency scams involved in the government’s “dumb” decision. They added, “We mostly used the Binance crypto exchange platform and wallet to trade, send or receive assets.” At the moment, we have no ordinary banks or cash services, and the Taliban have banned our only hope.
In June, the Taliban-led Central Bank of Afghanistan banned online forex trading in the country. A Bloomberg spokesperson said the bank views forex trading as illegal and fraudulent, saying: “There are no instructions in Islamic law to approve it.” After the Taliban regained power in Afghanistan, the financial conditions of local residents worsened as billions of dollars in foreign aid were cut and their assets abroad were frozen under US sanctions, according to Bloomberg.
Why did the Taliban ban cryptocurrency?
According to the ATN-News report, the main reasons for the ban are the volatile nature of cryptocurrencies and assets such as the US dollar leaving the country since cryptocurrency exchanges are not based in Afghanistan. Another reason given in the report is that cryptocurrencies are new and “people are not familiar with them.”
The head of the Foreign Exchange Syndicate, Ghulam Muhammad Shrabi, also claimed that cryptocurrency is used to deceive people. However, people familiar with the matter are not aware of any crypto-related crime or scam, and Al-Sahrabi has not provided any specific data.
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Some believe that the only reason for the ban is the decentralized nature of cryptocurrencies and their underlying blockchain technology. “They blocked it because they can’t control it,” a trader with over six years of experience in crypto told Cointelegraph, adding:
The government wants to see, control and manipulate everything in the country. Crypto is volatile, I agree, but everyone who uses it should know it. We also have stablecoins like Tether, USD Coin and many more for people who just want to send or receive transfers to/from other countries.”
Cointelegraph sources further reported that the Taliban have told merchants and cryptocurrency exchanges that using cryptocurrency is similar to “gambling,” describing it as haram — which means it is prohibited under Islamic law. They added that the government wants people to use local banks to transfer money, while “most local cash services are limited and do not allow us to withdraw all our money at once.”
“We can only get about 20,000 Afghanis (nearly $220) per week from local banks, and one has to queue for hours sometimes,” one crypto user who gets his brother’s money from Germany told Cointelegraph. . “In addition to all the difficulties in withdrawing money from banks, another problem is the exorbitant transaction rates that we are just trying to avoid.”
They added that there is always a range of hidden fees when using services such as SWIFT, Western Union, MoneyGram and the local hawala system. The crypto user said that transaction rates sometimes go up to 20%.
The danger of cryptocurrency in Afghanistan
After the wave of sanctions hit Afghanistan, many looked for an alternative way to get money from their families and friends abroad. The situation made room for cryptocurrencies, where local money transfer services were either banned or expensive.
Moreover, popular payment transfer companies such as PayPal and Venmo are not supported by banks in Afghanistan, which limits the financial services provided by these institutions. In addition, it is difficult to open a bank account due to the number of requirements one must fulfill, such as p
