The Taliban Takeover in Afghanistan: A Use Case for Blockchain Technology as a Vehicle for Asset Security Amidst Civil Unrest

By Alan Jurcak

On August 15, 2021, many around the globe were stunned to discover that Kabul and the Afghan government had once again collapsed at the hands of the Taliban.[1] Likely spurred by the announcement that the United States’ military forces would be exiting the country at the end of August, Taliban insurgents began their push towards the capital city in the days before its eventual takeover and, as documented in extremely graphic social media videos, left a trail of destruction and death in the streets in cities such as Kandahar.[2] By the time the Taliban’s armed forces reached the capitol building, the ousted President of Afghanistan, Ashraf Ghani, had fled the country by helicopter.[3] Upon meeting no armed resistance from the Afghan government soldiers, the Taliban were free to lay claim to Afghanistan’s seat of power for the second time in twenty years.[4]

 As the Taliban have begun to consolidate and solidify their control over the nation in a bid for legitimacy from the international community, the citizens of Afghanistan have already started to feel the effects of the brutal regime’s recent ascension. The Taliban’s forces have carried out public executions, scoured Afghan homes in search of individuals alleged to have aided the United States’ and NATO’s military efforts in the country, and have aimed to reinstitute their oppressive policies towards women that saw women denied from higher educational institutions and unable to leave their homes without accompanying a man.[5] Not only are Afghans poised to endure a collapse in terms of Afghanistan’s official treatment of human rights, but their economy has also begun to catastrophically collapse. As the Taliban’s takeover continued, city streets were lined with Afghans desperate to withdraw their savings before fleeing the country and being cut off from accessing their accounts.[6] Despite their efforts, many were unable to withdraw any funds at all.[7] Afghanistan’s banks experienced massive cash shortages requiring shutdowns, ATM machines were powered off throughout many cities, and money transfer services like Western Union temporarily suspended their operations in the country.[8]

 Without an authority governing the Central Bank amidst the turmoil, Afghanistan’s financial services and overall financial health sit in ruin.[9] Its citizenry is now forced to grapple with numerous forms of financial insecurity that are common for traditional financial institutions during political upheaval: the instability of their currency’s value and its effect on their life savings; access to records documenting ownership of land and property; the ability to withdraw or transfer cash funds, and the ability to access lending services for intermediate support or relocation. The citizens of Afghanistan, it seems, have little control over the future course of their nation’s government, but with the recent advent and adoption of cryptocurrencies and their underlying blockchain technology, [10] these same citizens may now have a say in their financial security amidst the looming uncertainty.

 To understand this proposition, we must first understand how cryptocurrencies and their utilization of blockchain technology operate. In its most simple terms, a blockchain is an immutable, universally accessible database of transaction ledgers.[11] These ledgers, known as a “block,” are cryptographically encoded to prevent alteration, and contain encapsulates all of the relevant information regarding the transaction.[12] This block of transactions is then validated by a decentralized consensus network that reviews the transactions from multiple points in the network to ensure the details of the transaction are valid.[13] The block is then added to the “chain” of past transactions that have been fully verified and persist in an unalterable and viewable state along the blockchain.[14] Put most basically, the blockchain ensures that data regarding transactions is reliably recorded and accessible via the internet. Cryptocurrencies such as Bitcoin, for example, utilize this technology to document every single transaction or transfer of the asset between digital wallets, as well as trades or swaps for other currencies.[15] While there are thousands of cryptocurrencies that each claim to serve disparate purposes through their token, the underlying blockchain and its immutable recordkeeping function remains largely the same amongst these digital assets.[16]

 While the Western world, especially on the retail investor side, has largely approached cryptocurrency and blockchain technology as a speculative venture, poor nations with unreliable banking and financial institutions stand to gain the most benefit from blockchain technology in terms of quality of life.[17] Utilizing cryptocurrencies or other blockchain services typically only requires an internet connection, and holding these currencies allows for funds to be transferred to any other wallet in the world and for a lower fee than what is typically charged by traditional money transfer services.[18] Though subject to frequent volatility, cryptocurrencies provide considerably more stability in the value of held assets than the currency of a nation embroiled in a political takeover.[19] Additionally, cryptocurrency exchanges also offer trading of “stablecoins,” which are tokens that have their value pegged exactly to the US dollar.[20] These stablecoins essentially operate as a tokenized version of the US dollar encoded onto the blockchain, and are subjected to far less volatility than other cryptocurrency assets that fluctuate in price according to the supply and demand for that specific asset.[21]

Although the people of Afghanistan face a long and uncertain road ahead, the adoption of cryptocurrencies as a form of legal tender by struggling nations could have numerous benefits for individuals suffering from the failures of traditional institutions. With continued adoption and the implementation of smart contracts,[22] citizens of Afghanistan and other nations experiencing turmoil could utilize blockchain services to store their medical records, document ownership of property and titles to land that they may leave behind when fleeing, and safely hold liquid assets outside the throes of rapid inflation.[23] This year, Afghanistan ranked twentieth in terms of overall cryptocurrency adoption metrics and had the seventh largest peer-to-peer exchange trade volume.[24] Even during the recent crisis, cryptocurrency holders in Afghanistan have shared their fondness for the digital assets and hope for increased adoption within their nation.[25] These Afghans, as well as other holders of cryptocurrencies among the developing world, are providing a use case for a technology that has the capacity to change not only the global financial system, but the way that we retain information and execute contracts. It is time that we start paying attention.

[1] See Christina Goldbaum et al., 20-Year U.S. War Ending as It Began, With Taliban Ruling Afghanistan, N.Y. Times (Aug. 15, 2021), https://www.nytimes.com/live/2021/08/15/world/taliban-afghanistan-news#afghanistan-talibal-jalalabad-falls.

[2] See @rtaworld, Twitter (Aug. 13, 2021, 5:08PM), https://twitter.com/rtaworld/status/1426289598779379713; See also Saeed Shah, Afghans Tell of Executions, Forced ‘Marriages’ in Taliban-Held Areas, The Wall Street Journal (Aug. 12, 2021), https://www.wsj.com/articles/afghans-tell-of-executions-forced-marriages-in-taliban-held-areas-11628780820.

[3] See Yaron Steinbuch, Russia says Afghan President Fled with 4 Cars, Chopper Full of Money, N.Y. Post (Aug. 16, 2021), https://nypost.com/2021/08/16/afghan-president-fled-with-cars-helicopter-full-of-money-russia/.

[4] Goldbaum et al., Supra note 1.

[5] Nilofar Sakhi, A Moral Consideration of the Taliban’s Legitimacy, South Asia Source (Aug. 30, 2021), https://www.atlanticcouncil.org/blogs/southasiasource/a-moral-consideration-of-the-talibans-legitimacy/; see also Shah, supra note 2.

[6] Sue Lannin, Afghanistan’s Economy on the Brink of Economic Collapse after Taliban Takeover, ABC News (Sept. 2, 2021), https://www.abc.net.au/news/2021-09-03/afghanistan-taliban-us-economy-hunger-war-terrorism/100430828.

[7] MacKenzie Sigalos, Inside Afghanistan’s Cryptocurrency Underground as the Country Plunges into Turmoil, CNBC (Aug. 21, 2021), https://www.cnbc.com/2021/08/21/bitcoin-afghanistan-cryptocurrency-taliban-capital-flight.html.

[8] Id.

[9] Id.

[10] Chainalysis, The 2021 Global Crypto Adoption Index: Worldwide Adoption Jumps Over 880% With P2P Platforms Driving Cryptocurrency Usage in Emerging Markets (Aug. 18, 2021), https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index.

[11] Maryanne Murray, Blockchain Explained, Reuters (June 15, 2018), http://graphics.reuters.com/TECHNOLOGY-BLOCKCHAIN/010070P11GN/index.html.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Alex Tapscott, Bitcoin Offers Freedom from Political Repression—and That’s a Key to its Future, Fortune (Feb. 18, 2021), https://fortune.com/2021/02/18/bitcoin-censorship-political-repression-deplatforming-china-belarus-russia-nigeria-crypto/.

[18] Nir Kshreti, Can Blockchain Technology Help Poop People around the World? The Conversation (Apr. 30, 2017),

https://theconversation.com/can-blockchain-technology-help-poor-people-around-the-world-76059.

[19] Sigalos, supra note 7.

[20] Steven McKeon, What are Stablecoins? A Blockchain Expert Explains, The Conversation (July 29, 2021), https://theconversation.com/what-are-stablecoins-a-blockchain-expert-explains-164812.

[21] Id.

[22] IBM, What are Smart Contracts on Blockchain?, https://www.ibm.com/topics/smart-contracts (last visited Sept. 3, 2021) (“Smart contracts work by following simple ‘if/when…then…’ statements that are written into code on a blockchain. A network of computers executes the actions when predetermined conditions have been met and verified. These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket. The blockchain is then updated when the transaction is completed.”).

[23] Murray, supra note 11.

[24] Sigalos, supra note 7.

[25] Id.