Taliban Shuts Down Crypto Exchanges as Central Bank Warns of Severe Economic Consequences

People of Afghanistan increased cryptocurrency usage following the Taliban* takeover of the country in August 2021. The landlocked country is facing a severe economic crisis due to western sanctions and internal instability.

Afghanistan security forces have arrested at least 13 people involved in crypto trading after it raided and closed down over 16 crypto exchanges in Herat province, Ariana News reported.

Herat is Afghanistan's third-largest city, and a law enforcement agency described it as a hub for trading in digital tokens.

The action against the digital currency market started in response to an order issued by Afghanistan's Central Bank, which imposed a nationwide ban on cryptocurrencies this month.

"The Afghanistan [Central] Bank stated in a letter that digital currency trading has caused lots of problems and is scamming people, therefore they should be closed. We acted and arrested all the exchangers involved in the business and closed their shops," Sayed Shah Sa'adat, head of the counter-crime unit of Herat police, explained to the press.

Local money exchangers said people have been using the digital currency for cross-border transactions to avert western sanctions. Afghanistan is shut-off from the SWIFT payment system.

The Global Crypto Adoption Index 2021 by blockchain research firm Chainalysis ranked Afghanistan in the top 20 out of the 154 countries it evaluated in terms of overall crypto adoption.

In June, the Taliban declared forex trading illegal under Islamic law and said that Afghanistan would adopt rules aligned with Sharia law.

Haibatullah Akhundzada, supreme spiritual leader of the Taliban, said on August 19 that his government will deal with the international community as per Islamic Sharia. "If Sharia doesn't allow it, we will not deal with any other country," Akhundzada said.

Afghanistan is experiencing its worst economic crisis due to the sanctions imposed by the US and its allies, including the freezing of $9.5 billion-worth of national assets and assets belonging to the Central Bank.

On Friday, the Islamic Emirate of Afghanistan, the term the Taliban use for its government, said that 200,000 Afghans, including women and children, have suffered from malnutrition in July.

* Organization under UN sanctions for terrorist activities