As the Taliban takes control of Afghanistan, and a high-stakes evacuation plays out at the Kabul airport, laser-eyed crypto-enthusiasts are taking to social media to urge regular Afghans to adopt bitcoin in the face of considerable economic uncertainty.
Their basic argument goes that amid rapid inflation and a destabilized national banking system, Afghans would be better off stowing away their assets in a borderless, blockchain-based digital currency that isn't vulnerable to the whipsawing economic conditions of a country in turmoil.
"As a person in the industry, as soon as I saw all of the chaos on TV, one of the first things I thought about was how people were transacting and moving wealth around," said John Wu, president of Ava Labs, a smart contracts platform with backing from Andreessen Horowitz.
Wu echoed an argument that crypto-heads have made repeatedly: bitcoin could serve as both an inflation hedge and a way to transact as traditional payment channels collapse.
Whatever the merits of this argument, some Afghans are already heeding their advice.
In its 2021 Global Crypto Adoption Index, blockchain data platform Chainalysis ranked Afghanistan 20th out of 154 countries, and if you isolate peer-to-peer exchange trade volume, it jumps to seventh place. In 2020, the country didn't even crack the list.
For comparison, the United States ranked eighth, while nearby India and Pakistan ranked second and third respectively. Vietnam tops the list.
Anecdotally, a recent CNBC report dug up at least a handful of Afghans who are parking their money in bitcoin and citing inflation fears as the impetus.
Afghanistan isn't the only country with a depreciated currency to see a shift into crypto. Venezuela, for instance, saw a spike in bitcoin adoption in recent years as the country battled hyperinflation.
Whether bitcoin or other cryptocurrencies offer a lasting solution to their economic woes is a much larger question, and one that hinges on a range of other factors — not the least of which is Afghan's ability to tap into the peer-to-peer network via the internet.
"Bitcoin maximalists will always say that more bitcoin is the answer, but for the Afghan population that's not feasible, considering that less than 10 percent has access to the internet," said Christopher Vecchio, a senior strategist for DailyFX, a financial analytics firm.
Afghanistan Gets Cut Off
The internet, however, is just one area where Afghanistan lacks access.
As bitcoiners have pointed out, the country is currently being cut off from the global economy across multiple economic channels, from foreign aid to bank reserves.
The World Bank announced on Wednesday that it was halting funding for projects in Afghanistan, citing concerns about how the Taliban's takeover will impact the "country's development prospects, especially for women," according to a statement reported on by multiple news outlets.
The IMF, meanwhile, is withholding approximately $460 million in emergency COVID-19 relief funding until the organization officially recognizes the Taliban as the country's leaders.
For Afghanistan, which prior to the regime change financed 75 percent of its public spending with forign aid, the pause in global support could be devastating.
At the same time, the country's basic financial infrastructure is also seizing up.
Western Union Co., the largest money transfer company in the world, suspended service in the country last week until further notice.
"Western Union understands the urgent need people have to receive funds, and we are committed to resuming operations for our customers in Afghanistan as conditions permit," the company said in a statement.
Bitcoin-bull Anthony Pompliano, founder of the blockchain-focused hedge fund Morgan Creek Capital, cited the service suspension as a big reason why Afghans should adopt bitcoin.
Perhaps most strikingly, the new Taliban government does not have access to a large portion of the country's financial assets. Due to sanctions on the Taliban, the U.S. has frozen at least $7 billion belonging to the country's central bank, which stowed the vast majority of its money in the New York Federal Reserve and other U.S.-based banks.
Since Afghanistan relies on regular shipments of dollars to keep its economy running, the lack of inflows could grind the economy to a halt, according to former central bank governor Ajmal Ahmady, who has now escaped the country.
'Cash Is King'
So for believers, the case for crypto couldn't be clearer.
"Whenever you see chaos or instability in one of these emerging countries, whether it be a situation with the currency due to hyperinflation or instability or just general government distrust, you see a surge in adoption, and usually that adoption doesn't go backwards," Wu said.
Still, some financial experts say this point of view lacks nuance, especially given the complicated and unique challenges facing the Afghan economy, which still relies heavily on paper currency.
In particular, Afghanistan has long relied on what's called the Hawala system, an informal network of trusted financial intermediaries who help move money around.
"Cash is king," Vecchio said. "The Afghani-dollar exchange rate has been going up and up, which is not a surprise, but that doesn't necessarily mean crypto is a viable solution."
He added that asking regular Afghans to put their money into bitcoin right now is irresponsible and ultimately implausible given the lack of internet access.
Admittedly, Vecchio is in the camp that sees crypto as a valuable, if smaller, part of your investment portfolio, rather than something that could replace fiat currencies.
As for Afghanistan's recent increase in adoption of crypto, he attributed this to a broader trend in emerging markets where individuals are looking for a hedge against inflation but noted that bitcoin hasn't always managed to serve that role.
"Is bitcoin an inflation hedge? It wasn't from May until early July. It lost about 50 percent of its value during that time period," he said.