Afghanistan shuts down 16 crypto exchanges in Herat

Last week, Taliban authorities shut down 16 crypto exchanges in the province of Herat, Afghanistan. The move came after the Taliban issued a ban on online foreign exchanges. Herat is the third largest city in Afghanistan and has been a hub for digital token trading.

The Taliban considers digital assets illegal and defrauds the nation. Herat head of criminal investigations Sayed Shah Sa’adat said that 13 people were arrested, with most of them released on bail. Additionally, it was reported that there were more than 20 crypto-related businesses shut down.

Sa’adat said that crypto trading had caused various problems, including scams. Da Afghanistan Bank (DAB) also considers online forex trading illegal and deceptive, as it is not in line with Islamic law.

“The Bank of Da Afghanistan (central bank) stated in a letter that digital currency trading causes many problems and defrauds people, so they should be shut down. We took action, arrested all the heat exchangers doing business, and closed their shops,” Sa’adat said.

“The central bank gave us an order to stop all money changers, individuals, and businesspeople from trading fraudulent digital currencies like what is commonly referred to as Bitcoin.”

As a result of the operation, Afghanistan has now joined China, which declared all crypto transactions illegal in September 2021.

Interest in cryptocurrency

Cryptocurrency has drawn interest from Afghan citizens due to the collapse of the country’s economy. They use crypto to preserve their wealth while preventing the Taliban from gaining access to it. However, the international sanctions imposed on the Taliban government make it difficult to purchase digital assets.

Herat Money Exchangers’ Union leader Ghulam Mohammad Sohrabi said that companies in Afghanistan open cryptocurrency accounts outside the country.

“Digital currency accounts are outside the country and are purchased from the companies. Our people are not familiar with it, so it is better not to use it. This currency is new in the market and has high fluctuation [rates],” he said.

Last year, Chainalysis ranked Afghanistan as one of the top 20 countries in the world regarding crypto adoption. The report was based on purchasing power parity per capita, which favored poorer nations. Google trends data also showed that searches for “bitcoin” and “crypto” had increased in the country.

US Deputy Secretary of the Treasury Wally Adeyemo is one of the advocates of cryptocurrencies. He said earlier this year that crypto payment presented the potential to alleviate the burdens of living in difficult situations.

“Just imagine what a frictionless, global digital payments system with appropriate controls for illicit finance could do for people in places like Afghanistan — if relatives abroad could easily send remittances, or if NGOs could pay their staff halfway around the world with the click of a button on a smartphone,” Adeyemo said.

In February, the Taliban said they would study to determine if digital tokens could be allowed under Islamic financial practices. They were looking for a way to revive their collapsing economy following the withdrawal of US forces last year.

Some religious scholars had already predicted the Taliban would end up banning crypto due to elements of wagering and uncertainty. However, other Muslim-majority countries have a more lenient approach to crypto. These include the United Arab Emirates, where crypto trading is allowed in Dubai’s free zone. Bahrain has also supported digital assets since 2019.

Regardless, Afghan authorities have remained adamant that the cryptocurrency industry had a more negative impact, full of fraud and scams, making a crackdown necessary.