Crypto

Taliban had ‘massive chilling effect’ on Afghan crypto market: report

The Taliban’s takeover of Afghanistan has had a “massive chilling effect” on the local cryptocurrency market, leading it to an effective “crash”, according to a recent report.

Blockchain analytics firm Chainalysis in an October 5 report said the Middle East and North Africa (MENA) region saw the strongest crypto market growth in 2022, but noted that Afghan crypto dealers have three options: “flee the country , cease operations or risk being arrested”.

The report states that after the Taliban seized power in August 2021, the crypto value received in August and September of the same year peaked at over $150 million and then fell sharply the following month.

Prior to the takeover, Afghan citizens received an average of $68 million per month in crypto value mostly used for remittances. That figure has now dropped to less than $80,000 after the takeover.

Chart from Chainalysis 2022 Geography of Cryptocurrency Report. Source: On-chain analysis

Afghanistan was ranked 20th in Chainalysis’ 2021 Crypto Adoption Index released in October 2021, but is now at the bottom of the list after the Taliban takeover.

The restored Ministry for the Propagation of Virtue and the Prevention of Vice in charge of the application of Islamic law in the country is at the origin of this change. Chainalysis explains that the agency has equated cryptocurrency with gambling by declaring it haram – prohibited by Islamic law.

Related: Terrorist groups can turn to NFTs to raise funds and spread messages: WSJ

Much of the activity still undertaken in the country stems from money laundering from illicit sources such as bribes or drugs, an unnamed source cited to Chainalysis.

The individual added only a “small part” consisting of “young people who have a few hundred dollars” to the digital assets of the day-trade.