Afghanistan: Can Blockchain and Crypto Prevent or Mitigate The Fallout of Failing States?
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Afghanistan: Can Blockchain and Crypto Prevent or Mitigate The Fallout of Failing States?

1yr ago

Does cryptocurrency have the potential to help citizens of nations in conflict?

Afghanistan: Can Blockchain and Crypto Prevent or Mitigate The Fallout of Failing States?

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Images of refugees piling onto airplanes, women's rights advocates lamenting the inevitable curtailing of their freedoms, and armed men marching through the streets of Kabul, Afghanistan have led many to ask: what could have been done to prevent this, and what can be done to help? The answer to both questions, according to some analysts, lies in the adoption of cryptocurrency
This article seeks to analyze the potential uses of cryptocurrencies in past, present, and future in Afghanistan. Does crypto have the potential to help failed/leper/authoritarian states, or is it a promising cure-all propagated by overzealous enthusiasts? Keep reading and find out.

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An Introduction

Unless you've been living under a rock, you may have noticed that the Taliban have taken over Afghanistan, ending America’s 20-year forever-war, and throwing an already struggling society into chaos. Indeed, millions of Afghans awoke to the sound of explosions in late July, and packed their bags, and headed to the local banks to withdraw money. Many consequently discovered that their financial system, including their savings, had been rendered worthless by the preceding conflict. Congruously, those seeking to flee the country, found this collapse made it impossible to transfer money abroad, while those choosing to stay have been forced to revert to a barter system while the Taliban arrange a new economic system.
While the rest of the world watched in dismay, numerous cryptocurrency enthusiasts have pointed out the technology's potential in providing financial services to citizens of countries with unstable currency and/or ongoing political and economic strife. 
Drawing on a mixture of hypothetical and real-world examples, several personalities in the cryptocurrency ecosystem have suggested that the decentralized nature of cryptocurrency could have altered the ill-fated entry, the prosecution of the war, the inevitable failure, and indeed, future events in Taliban-controlled Afghanistan. 

How can Crypto Help in Afghanistan?

Industry experts argue that cryptocurrency could (or could have) provided the following benefits during the present crisis: 
  • Cryptocurrency provides an alternative, decentralized financial system to that imposed by the Taliban/corrupt Afghan officials. Using cryptocurrency could enable Afghans (and indeed anyone subjected to an authoritarian state) to control their oppressors’ access to wealth. 
  • And finally, that cryptocurrency could help avoid unnecessary, unpopular future conflicts. 

The pros and cons of each of these ideas will be discussed below, but first, it is necessary to discuss why, and indeed how, cryptocurrency provides these benefits. To do so, we need to review the fundamentals of cryptocurrency and blockchain technology. 

The Promise of Blockchain

Bitcoin, and other cryptocurrencies, use blockchain technology to circumvent traditional financial systems while providing a transparent ledger of transactions. This means that Bitcoin is controlled by the community and its transactions can easily pass under the noses of state watchdogs. 
Indeed, one of Bitcoin’s strongest attributes is its lack of reliance on pre-existing financial infrastructure — you do not need banks, bankers, physical currency, or a stockbroker to buy, transfer, invest in, or make a purchase with bitcoin. All you need is a device and access to the internet. These features have unjustly drawn criticism from federal government authorities who fear its use in illicit activities. The other side of the coin is that these features are particularly useful for Taliban-controlled Afghanistan.

Benefit 1: Cryptocurrency Provides an Alternative, Decentralized Financial System

Crypto enthusiasts argue that the mass adoption of cryptocurrency could have remedied some of the former Afghan regime’s issues and mitigated the future Taliban regime's abuses. They argue that governments use financial systems to control citizens. This can take several forms; indeed they generate income through taxation, and often have the authority to manipulate the value of the currency, and can decide who gets approved for loans or aid, etc.

Likewise, purchasing day-to-day items or importing foreign goods in Afghanistan previously involved paying bribes to corrupt officials and middlemen. Purchasing goods under the Taliban will likely be the same except the officials will be armed and the goods will be subject to international sanction. 
Using Bitcoin or other cryptocurrencies helps address both circumstances by cutting out the middleman and decentralizing control over the financial system. In theory, it should be easier for Afghans to make discreet purchases, receive foreign aid, avoid paying bribes/taxes, and purchase goods using Bitcoin. 

Likewise, this money can also be used to pay for discreet online classes and money can be transferred directly to Afghans by aid groups who worry about their donations being used by the Taliban to purchase arms. 

Benefit 2: Access to Financial Services

El Salvador’s recent decision to adopt Bitcoin as a national currency could improve their economy by easing money transfers from El Salvadorians abroad and providing financial services to locals who can't otherwise afford them. The same technology would have proved exceedingly useful during the Taliban’s recent run on the banks. Indeed, using Bitcoin would have allowed many Afghans to transfer their wealth abroad before becoming refugees. 

Alternatively, the use of cryptocurrency could have enabled financial services — such as loans and transfer services — during the previous regime/US occupation. This would have helped reduce corruption and develop the infrastructure and financial system. Whether this would have helped legitimize the previous regime is unknowable, but, all things considered, it couldn't have hurt. 

Benefit 3: Can Crypto Help Prevent Future Conflicts?


The idea that cryptocurrency could avoid wars in the future was recently posed by a reporter for Vice. This is a bit of a stretch, but basically, the idea is that Americans adopting cryptocurrency would have greater say in how that money is used or spent. Governments have a long history of printing money to pay for wars. The tradition dates back to the Roman Empire. While it may not have been enough to curtail the post-911 fervor that propelled the US into war, it could have ended the war when it grew terribly unpopular during the Obama administration. Likewise, it could have stopped or shortened the Iraq War, which some experts argue sucked resources from the Afghan conflict, hamstringing the war effort

The Flaws in the Arguments 

All three of these arguments, while noble, suffer from severe problems: 

  • Not all Afghans have access to the internet, and the internet is controlled by the government
  • Actors start and fund wars in different ways 
  • The use of crypto is a double-edged sword 
The main flaw in the above arguments is easily discernible — Afghanistan is poor and underdeveloped. An older, popular article emphasized the uneducated, rural nature of much of the population — many of whom didn't find out about the 911 attacks until the Americans were kicking down their doors. Much of the country lack reliable access to electricity and water, let alone the internet. This inherently limits the use of Bitcoin to the cities and to wealthy rural Afghans. 
Similarly, unlike El Salvador, whose Bitcoin system relies on smartphones and the app Bitcoin Beach, the Taliban are not afraid of abusing people’s rights and would not refrain from seizing tablets, home computers, and smartphones from the few literate people who can afford and understand how to use them. Likewise, they are in control of the internet infrastructure and may find that simply dismantling it suits their needs better. 
As for the argument that Bitcoin could have prevented the war in the first place. It benefits from the value of hindsight. Most Americans supported the intervention regardless of the consequences.
Likewise, contrary to popular belief, Bitcoin transactions are easily trackable. The Taliban could review previous transactions in an effort to discover enemies or people with foreign backers. Indeed, they could also use it to purchase arms or launder opium money. It is a double-edged sword. 

Analysis and Conclusion 

It is impossible to predict the future role of cryptocurrency in the Afghan economy — but it is almost certainly going to play one. 
Empire after empire has failed to save Afghanistan from the control of the Taliban. It is, therefore, unreasonable to assume that any force — even one as revolutionary as the blockchain — has the ability to significantly improve circumstances for those on the ground. 

That being said, it is clear that solutions presented by cryptocurrency could have helped many people improve their circumstances during the last regime and escape the incoming one. Indeed, many refugees would have been in better financial circumstances should they have invested their money in literally anything else besides the Afghan afghani— be it Bitcoin, Dogecoin, or gold bars. Likewise, anything that facilitates the migration of refugees is invaluable under the circumstances. 

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