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27th August 2022 > > Afghanistan.


tl;dr

I am always worried about Afghanistan.


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Market Wrap

Out of Jackson Hole, Wyoming, yesterday came this comment from Jerome Powell, Chair of the Federal Reserve:


"… the historical record cautions strongly against prematurely loosening policy.”


Cue a broad sell-off of all risk assets through surprisingly not treasuries. S&P 500 was down over 2% in an hour. BTC down over 5% is no surprise with that as a backdrop, liquidating longs, and turning the perpetual futures funding rate negative.


Curious Cryptos’ Commentary – Afghanistan

I suspect that most people associate Afghanistan with extreme temperatures, extreme poverty, wide-spread illiteracy, deep-seated and state sponsored racism, homophobia, and misogyny. Oh, and not forgetting terrorism. Just some of the many reasons the Taliban are not contemplating elections any time soon.


You will not be surprised to hear that in 2020, blockchain data firm Chainanalysis did not even bother to include Afghanistan in its annual report for crypto adoption. The aforementioned illiteracy and extreme poverty – allied with intermittent electricity supply for just a part of the country, and even more intermittent internet access – would appear to consign Afghanistan to a crypto-free future.


That turns out not to be the case.


For 2021, Chainanalysis reports that Afghanistan ranked 20 out of 154 countries for crypto adoption.


The triggers for this sudden ramp up in activity, despite all the obstacles, are obvious.

Following the Taliban takeover, the country’s foreign reserves denominated in USD and EUR held in Western banks were frozen.


The work of NGOs largely came to a halt when faced with a severely deteriorating operating environment in terms of safety for staff.


The companies contracted to print Afghani dollars in Poland and France ended shipments.

Swift – the pan-global means of transferring money around the world – stopped all services to and from the country.


Commercial and retail banks within Afghanistan simply stopped working. Retail customers could queue as much as they liked, but they had no access to their bank accounts.


And so, cryptos came to the rescue.


Or at least to those who are relatively well-educated, with access to a mobile phone, and the internet.


The Digital Citizen Fund, founded in 2013 to teach women about computer programming and financial literacy, started making crypto donations in the hope of helping to alleviate some of the problems in this poor, benighted country.


HesabPay, a crypto app set up in 2019, had gathered nearly 400,000 users, or 2% of the population, mostly in the few months following the Taliban takeover.


Though admittedly operating at the margins, the success of cryptos in Afghanistan can be measured by the recent “ban” by the Taliban on forex – and by extension crypto - trading. One of the few independent news outlets (Ariana News) reports that SIXTEEN crypto exchanges have been shuttered and their employees arrested in the Herat province in the last week alone.


One of the strongest arguments in favour of cryptos is that centralised, controlling, one-party states (Afghanistan, China, Russia) refuse to countenance the existence of cryptos, with futile “bans”. If murderous megalomaniacs like Putin and Xi are against cryptos, then they must be a force for good.


A spokesman for the Central Bank, Da Afghanistan Bank, explained the reason for the ban:

“There is no instruction in Islamic law to approve it. As a result, we have banned it.”


I am not aware that the Quran explicitly approves using Kalashnikov rifles either, so I look forward to seeing them banned too.

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