What the Taliban crackdown means for crypto’s future in Afghanistan

When the Taliban again rose to power in August 2021, Afghanistan faced global sanctions that led to many international organizations and money transaction services halting operations in the country. This made room for digital currencies and stablecoins to be widely used, at least to send or receive remittances.

However, according to the provincial news website ATN-News, the Taliban government recently banned cryptocurrencies and has arrested 16 local exchanges in the northwestern city of Herat in the past week.

According to the report, the exchanges were initially given a grace period to comply with the government’s regulations but were ultimately shut down after failing to do so. The Afghan government has now asked locals to refrain from using digital assets and has warned them of the risks associated with such activities.

However, people familiar with the matter — who want to stay anonymous for security reasons — told Cointelegraph that “no previous announcement or warnings were given.”

“Da Afghanistan Bank (central bank) stated in a letter that digital currency trading has caused lots of problems and is scamming people, therefore they should be closed. We acted and arrested all the exchangers involved in the business and closed their shops,” the head of the counter-crime unit of Herat police, Sayed Shah Sa’adat, told ATN-News.

People familiar with the matter believe there were no crypto-related scams involved in the government’s “stupid” decision. “We mostly used the Binance crypto exchange and a wallet to trade, send or receive assets,” they added. “Right now, we don’t have standard banks or monetary services, and the Taliban banned our only hope.”

In June, the Taliban-led central bank of Afghanistan banned online foreign exchange trading in the country. A spokesman told Bloomberg that the bank views forex trading as both illegal and fraudulent, saying “There is no instruction in Islamic law to approve it.” After the Taliban regained power in Afghanistan, local residents’ finances worsened as billions of dollars in foreign aid was cut off and their overseas assets were frozen under United States sanctions, per Bloomberg.

Why did the Taliban ban crypto?

According to the ATN-News report, the main reasons for the ban are the volatile nature of cryptocurrencies and assets like the U.S. dollar leaving the country since crypto exchanges are not based in Afghanistan. Another reason noted in the report is that digital currencies are new and “the people are not familiar with them.”

The head of the fiat exchangers’ union, Ghulam Mohammad Suhrabi, also claimed that crypto was used to scam people. However, people familiar with the matter do not know of any crypto-related crime or scam, and Suhrabi also didn’t provide 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 banned it because they cannot control it,” a trader with over six years of crypto experience 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 must know that. We also have stablecoins like Tether, USD Coin and many more for the people who just want to send or receive remittances to/from other countries.”

Cointelegraph’s sources further stated that the Taliban have also told traders and crypto-to-fiat exchanges that cryptocurrency use is like “gambling,” calling it haram — which means forbidden under Islamic law. They added that the government wants people to use local banks to transfer money, while “Most of the local monetary services are limited and do not allow us to withdraw all of our money at once.”

“We can only get around 20,000 afghanis (roughly $220) per week from the local banks that one should stay in line for…