Afghanistan Currency Crisis – Crypto Adoption Rising Post Taliban Takeover

Post-Pandemic and nationwide war-like situations have certainly taken a toll on the Afghan National Currency. Amid this economic uncertainty, citizens have not been able to withdraw their savings from national banks because of a Cash Shortage.

Adding more to that, the currency has been depreciating against the US Dollar for months in a row, and the hard-earned wealth of the people is getting eroded just like that. The Afghan Central bank has reserves worth $9-$10 billion dollars invested in liquid treasuries and gold held abroad but during a crisis that has proven to be of little help.

Citizens who have been saving up Bitcoin or other Cryptocurrencies may not be able to buy goods using their satoshis but fortunately, they have managed to save their wealth from getting depleted eventually as the Afghan National Currency keeps dropping in value over time.

In fact, Google trends show interesting data that the interest in Bitcoin and other Cryptocurrencies have spiked in the months of July, August in Afghanistan. But I didn’t get the data showing an exact number of searches since Google Trend shows only the interest in a specific area or location.

A 22-year old said to CNBC in an interview about his close looking at his Binance account portfolio post the Taliban takeover. This is one of the many instances when Bitcoin has exactly served the purpose for which it was created. Not only that, even some nationals might even have used Bitcoin as a way of transferring their wealth overseas.

Early Mover Advantage

According to my opinion, the limitations which are imposed by a National Fiat Currency are being solved by Bitcoin. When a nation adopts a Global Currency that can’t be manipulated by a single Government or Organization, things start happening for the benefit of people.

The best part about Bitcoin, which sort of motivates everyone who’s joining early is that the model by which it incentivizes the early adopters. People who joined way back during the initial days of Bitcoin made an insane amount of wealth today. Even if one looks 10-15 years down the road, you can easily relate the way supply crunch triggers the price action in Bitcoin.

Apart from all the incidents mentioned above, some traders looking to make some extra cash in Afghanistan also looked towards trading Digital Assets. Trading can be of many types in Spot Market, Futures & Margin but that depends also on the exchange or the app that a person is using.

Ban runs aren’t rare in the history of modern-day banking. During times of economic stress, banks often run out of cash, and the citizens are left wondering what happened to their life savings. Banks do fail and as soon as people understand the risk of keeping your savings in them, you’re part of a Fiat Currency bubble that will sooner or later explode. I’m not saying this just because being a pessimist sounds fancier, but the harsh reality is that.

Remember Yes Bank crisis or PMC Bank? I’m sure most of their customers do remember that.

Fractional Reserve based Lending

Banks lend money based on a Fractional reserve-based system, which has its own downsides. Imagine having 1 Lakh rupees being shown in your bank account but when you reach the bank to take it out as cash, you find only Rs 3000 or Rs 4000 left in the account. Yes, that’s what happens, the money you see isn’t the money you have in your bank. Imagine 1000s of people all rushing towards banks to take out their cash. It’s obvious, banks won’t be able to serve all the withdrawals without fresh deposits.

People standing in long queues hoping to get their savings before fleeing the country. All of that effort was put in vain. That is what happened in Afghanistan.

CBDC’s even worse?

Bitcoin can conserve value and save people from such disasters provided things are well regulated in a nation. CBDC won’t solve the problems which we have today. They will make things even worse. If a nation is thinking to compete with Bitcoin by launching its own CBDC, then I’m sorry to say, they are blinded with optimism.

People should be given a choice. A power to choose what works for them and what doesn’t. If someone feels they are comfortable holding their savings partly in Bitcoin and Fiat, then that should be allowed. Again, this isn’t any financial advice but a rather personal opinion.

With CBDC’s it will be even easier for the central banks to print money and give stimulus to an economy but money doesn’t come free. Printing money has its own downsides of Devaluation, Hyper-Inflation, Mass Protests. But can all of that save the common man?

I feel the problem is we all should acknowledge the faulty fiat system and try to experiment with modern-day technologies. Afghanistan will be another example in a list of nations like Zimbabwe, Yugoslavia, Argentina, etc. Fiat is doomed to failure, all the eyes remain on when.

Are you feeling a bit overwhelmed? We have a guide to help you as well.

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