Afghanistan, which ranked 20th out of 154 countries in last year’s Chainalysis Adoption Index, has now slipped to the bottom of the list, according to Chainalysis. In August, the Taliban banned cryptocurrencies nationwide, calling them “haram” or sinful business because of their uncertainty and betting elements. Police arrested 13 cryptocurrency traders who did not stop trading the digital token but have been released on bail pending trial later.
Chainalysis said they found that Afghanistan’s chain activity reached a temporary peak in August and September, after the Taliban took over power, before experiencing an unprecedented decline. From November 2021 to date, on average, users in Afghanistan earned less than $80,000 per month. The average for the month before the Taliban took over was nearly $68 million.
Afghanistan’s unreliable electricity supply and low internet access are not particularly conducive to crypto activity. Since the Taliban takeover, Afghanistan’s economy has been thrown into turmoil by US sanctions, depletion of foreign aid, and cash transfers.
In addition, the United States has frozen central bank reserves in Afghanistan, effectively crippling the domestic banking sector. Afghans unable to send money to relatives abroad or remit within the country are turning to cryptocurrency-based alternatives.
The Taliban were initially seen supporting the crypto market. In February, the group said it would study whether cryptocurrencies could be incorporated into the practice of Islamic finance. The cryptocurrency was later determined to be sinful, especially given its proximity to gambling.
The Taliban’s crackdown has had a major impact on the country’s crypto market. Under the current circumstances, crypto dealers are left with three options. Stop working, flee the country, or risk being arrested.
Chainalysis also revealed the possibility that a portion of the increased crypto purchases was utilized to launder Afghanistan’s opioid and methamphetamine production, an anonymous source said.
Future crypto projects are unlikely to materialize under the current Taliban regime. But those who can secretly acquire cryptocurrency will be able to insulate themselves from any future economic shocks, Chainalysis stated.