Cryptocurrency Regulation Landscape in Afghanistan Prior to 2024

The legislative landscape for cryptocurrencies in Afghanistan prior to 2024 was marked by significant changes and challenges, particularly with the Taliban’s ascension to power. In a decisive move, the Taliban government banned cryptocurrencies entirely. This decision was widely criticized by many users and traders, who saw it as one of the worst policy decisions made by the government. The prohibition included the closure of 16 local exchanges in Herat, following a grace period provided for compliance with the government’s regulations, which ultimately led to their shutdown for failing to comply.

The central bank of Afghanistan, Da Afghanistan Bank, played a crucial role in this decision, citing the trading of digital currencies as a source of numerous problems and scams. Moreover, in June, the Taliban-led central bank also banned online foreign exchange trading, viewing it as illegal and fraudulent under Islamic law. The reasons for the cryptocurrency ban included concerns about the volatility of cryptocurrencies, the outflow of assets like the U.S. dollar from the country, and the unfamiliarity of the Afghan population with digital currencies.

There was a belief among some that the real reason for the ban was the decentralized nature of cryptocurrencies, which the government could not control. The Taliban’s stance on cryptocurrencies was that their use was akin to gambling and thus forbidden under Islamic law. This situation was exacerbated by the limited services offered by local banks, which included withdrawal limits and high transaction fees.

The sanctions imposed on Afghanistan had led many to turn to cryptocurrencies as an alternative means of receiving money from abroad. The lack of support from popular payment transfer companies like PayPal and Venmo in Afghan banks further limited the financial services available. Cryptocurrencies had become a vital financial tool for many, especially for online workers and those receiving remittances from abroad.

Despite the ban, interest in cryptocurrencies remained high in Afghanistan, with a significant increase in searches for terms like “Bitcoin,” “crypto,” and “cryptocurrency,” particularly in provinces like Herat, Kandahar, Kabul, Nangarhar, and Balkh. Afghanistan was ranked 20th among 154 countries in the 2021 Global Crypto Adoption Index by Chainalysis, indicating a strong willingness among the Afghan population to invest and use cryptocurrencies in their daily lives.

There were speculations that the Taliban might be considering the creation of a central bank digital currency (CBDC) and could have plans to use blockchain technology. However, many traders believed that existing cryptocurrencies already provided what people needed, casting doubt on the need for a CBDC.

In summary, the period leading up to 2024 in Afghanistan saw a complex and restrictive regulatory environment for cryptocurrencies, driven by the Taliban’s policies and the challenges posed by the country’s broader economic and political situation​​​​​​​​.