Cryptocurrency remittances have been a lifeline for Afghans, when a sudden US withdrawal caused Western Union to temporarily shut down operations and severely limit withdrawals by banks in the country.
As regulators in remittance source countries such as the US and UK change their view on crypto, they must remember how essential these currencies are to some of the world’s most vulnerable.
Crypto will become increasingly indispensable as local currency – in Afghanistan and elsewhere – becomes not only difficult to access but unreliable as a store of value. Conflict fuels inflation, which makes currencies less valuable – sometimes worthless.
If we regulate cryptocurrency transfers to please crypto enthusiasts at home, we risk turning our backs on (again) the people who need this asset class the most: the Afghan people and their Like many others.
For dispatch to remain a lifeline, they need to be fast. When money is needed, it is often needed immediately.
With the acquisition of the Taliban, the financial system of Afghanistan has also froze. Foreign aid has been halted, which is almost 40% of Afghanistan’s GDP, according to the World Bank. Similarly, foreign reserves of The central bank of Afghanistan has been frozen, which is worth about $ 9 billion.
In addition, international money transfer companies such as Western Union and MoneyGram ceased their services (in some cases, they have resumed activity for now) in response to the Taliban takeover and the blocking of foreign aid by Western countries. , leaving the average Afghan no way to connect with the global financial system and, crucially, no way to receive remittances from relatives abroad.
remittances, the practice of sending money “back home” from wealthy countries, Makes up about 4% of the country’s GDP. In an economy so heavily dependent on cash, a sudden collapse of local financial infrastructure could mean the difference between life and death for many Afghans.
For dispatch to remain a lifeline, they need to be fast. When money is needed, it is often needed immediately. An internally displaced person, for example, cannot wait three to five days for funds to be withdrawn; They need food, fuel and medical supplies today.
Bitcoin “maximists” widely claim how crypto will change the global economic system. Believe them or not, we can see crypto revolutionizing remittances in already volatile, conflict-ridden places. Afghanistan presents a textbook use case for cryptocurrencies in failed states.
Sometimes, the extreme need produces the strongest argument for a new technology. Afghanistan is Ranked 20th out of 154 countries in the Global Crypto Adoption Index prepared by Chainalysis, a blockchain data platform. When adjusted for peer-to-peer transactions (including remittances), it ranks seventh. In 2020, Afghanistan didn’t even make the list.
Afghanistan is not alone. Recently the use of crypto has increased in Lebanon, Turkey and Venezuela. Those people aren’t trying to get rich – they’re simply trying to get money from relatives abroad and prevent their wealth from disappearing in times of high inflation.
“Many people doing mining and trading [cryptocurrencies] Not to acquire products, but to protect ourselves from hyperinflation,” said Venezuela-based crypto consultant Jonton Morales. done inspection.
Lebanon is another example: as the lira lost 80% of its value, downloads of the Lebanese bitcoin wallet For example, BlueWallet grew 1,781% year over year in 2020.
But Afghanistan may be the most urgent and sad case of why the Global South needs crypto. As cash crunches, prices rise, and as the Taliban lose the foreign aid the country previously relied on, the already crumbling Afghan currency will weaken further. By allowing the Afghan people to receive, store and spend their wealth in bitcoin, they may be able to protect themselves from the worst effects of a failing state.
And this is what we must remember when we in the West regulate cryptocurrencies. That regulation will not just affect speculators; This will affect those who want to send “back home” remittances. The recipients of the remittances have the most to lose.
When Federal Reserve Chairman Jerome Powell published his report on the next phase of cryptocurrency regulations, I hope he will not forget the people who need cryptocurrency the most: the Afghan people – and millions of people like him around the world.
While the West may have turned its back on the people of Afghanistan, we need to ensure that our laws do not leave them in the dark. We need cryptocurrency regulation that ensures those important financial lifelines are not lost. If we do that, we are closing another door of hope to those who need it most.