Crypto provides fix for some in crisis-hit Afghanistan

Digital currencies, impervious to international sanctions, allow handful of young Afghans to avoid the worst of crisis.

A university student exchanges cryptocurrency for cash at a currency exchange office in Herat
University student Arezo Akrimi, right, exchanges cryptocurrency for cash at a currency exchange office in Herat [Wakil Koshar/AFP]

In the middle of a bazaar in western Afghanistan, Arezo Akrimi takes out her smartphone and, after a few taps of the screen, changes some cryptocurrency for a bundle of hard cash.

Akrimi, 19, is one of the 100 students in Herat receiving approximately $200 a month in cryptocurrency since September thanks to the American NGO Code To Inspire.

This sum, which she converts at a bureau de change into Afghanis, is crucial for the rent and to help feed her family of six.

Since the Taliban returned to power in August, Afghanistan’s economy has virtually collapsed and the country is in the grip of a crisis caused by the seizure of billions of dollars of assets by the United States, which withdrew its troops after 20 years of military occupation.

The decision by international financial institutions to suspend funding to Afghanistan has further made economic revival nearly impossible, and the diplomatic isolation of the so-called Islamic Emirate of Afghanistan, as the Taliban’s government names the country, has not helped the cause.

But digital currencies and their decentralised architecture, impervious to international sanctions, are allowing a handful of young Afghans to avoid the worst of the crisis.

“It was very surprising for me to learn that this could be used in Afghanistan,” Akrimi told the AFP news agency. “It was really helpful.”

Code To Inspire was founded to teach computer programming to women in Herat, but its hi-tech approach is now also helping students get funds in the economically deprived nation.

Bank transfers to Afghanistan are almost impossible currently due to Western sanctions.

But even those with money in a bank struggle to get it out – individuals are limited to withdrawing the equivalent of $200 a week, and businesses $2,000.

Customers have to queue for hours even for those transactions.

Cryptocurrency transfers have allowed the NGO to circumvent these obstacles while ensuring that each donation gets to those who need it most, founder Fereshteh Forough told AFP.

“Crypto is an incredible way to overcome all kinds of political and economic sanctions, but also a tool that can change the lives of people living in an authoritarian regime,” says the American, whose parents fled Afghanistan in the 1980s.

To guarantee the financial security of its students, the NGO avoids paying them in Bitcoins, the best-known cryptocurrency the price of which regularly swings wildly.

Instead, it favours the BUSD, a so-called “stablecoin” the price of which is backed by the US dollar.

“One BUSD is one dollar,” says Forough.

Crypto coverts

Beyond this humanitarian initiative, cryptocurrencies are gaining other followers in the country’s second-largest city Herat, according to forex dealer Hamidullah Temori.

He has seen an influx of new customers over the past six months, many of whom regularly come to convert crypto assets sent by relatives from abroad into Afghanis.

“Since the Taliban came to power [cryptocurrency] transfers to and from abroad have increased by 80 percent,” he told AFP.

Transfers are instantaneous and commissions are much lower than transactions made through Western Union or hawala systems, which are traditionally favoured by Afghans. Hawala forms of cash transfers exist outside the banking system.

In Kabul, Noor Ahmad Haidar has become a crypto convert by force of circumstance.

The young man, who started exporting saffron to the US, the United Kingdom, Australia and Canada in early 2021, now has 90 percent of his orders paid for in Bitcoins.

“I avoid going through the chaotic process of bank transfers,” he says.

“Since August, it has really become the only option available, and the most convenient for me.”

Its growing popularity in Afghanistan was noted by Chainalysis in its 2021 Global Cryptocurrency Adoption Index, which ranked the country 20th out of 154 countries for “grassroots take-up”.

“I don’t think it’s just in response to the Taliban taking over,” says Kim Grauer, the firm’s director of research.

“It’s also because we’re at a time when there are more solutions that allow you to trade cryptocurrencies on your phone and more people understand what it is.”

Still, while the momentum is growing the volume of trading remains very low, and will remain so due to the lack of internet access and high levels of illiteracy in Afghanistan, she says.

In this photo taken on February 15, 2022, university students use cryptocurrency on their smartphones [File: AFP]

‘Very good protection’

But for those who can venture into this world, cryptocurrencies could be a lifeline.

Besides his studies, Ruholamin Haqshanas writes from Herat for India-based media specialising in new technologies.

Since the advent of the Taliban, his salary – paid entirely in stablecoins – has allowed him to absorb the galloping inflation and the free fall of the Afghani.

“The stablecoins offer a very good protection against the loss of value of the currency,” says the 22-year-old student, who now earns more than his doctor father.

The young man is also trying to speculate on some of the more volatile cryptocurrencies, thanks to the advice of a WhatsApp group with 13,000 members in Herat.

Fellow student Parisa Rahamati earned $600 in February hedging on the price of decentralised currencies such as Ethereum and Avax – a windfall she shared with her widowed and unemployed mother.

“You have to be willing to take risks,” confides the 22-year-old.

“Crypto is 50-50 … you can double your bet or go to zero.”

Source: AFP