This article was written exclusively for Investing.com.
- Kabul falls; A run on the banks is only one issue facing Afghanistan
- Numerous examples throughout history where wealth evaporates
- Cryptocurrencies are global
- Computer wallets travel well
- Cryptos transcend politics and ideologies
The world was shocked last week as the Taliban took over all of Afghanistan. After nearly twenty years of a US and NATO presence and military actions in the mountainous and tribal central Asian country that cost many lives and trillions, the departure of troops and handover to the trained Afghan army did not go as planned. The Taliban moved in swiftly and captured the capital, Kabul, causing a scramble to exit not seen since the final days of the Vietnam war.
The US and NATO moved into Afghanistan after the Sept. 11, 2001 attacks to thwart terrorism that had flourished under the Taliban’s regime. With the two-decade anniversary of the attacks only weeks away, the Taliban are back in control.
As people scramble to leave a country, fearing for their lives, they grab everything they can. Reports of runs on banks in Kabul as the Taliban approached come as no surprise, as it is history repeating. When the US military left Saigon in 1973, the local gold price rose to a reported $50,000 per ounce as those departing looked to transfer their wealth and savings into assets they could carry out of the country.
A half-century later in Kabul, those holding cryptocurrencies in a computer wallet or on a flash drive could slip their Bitcoin, Ethereum, or other crypto holdings into their pockets for their journey outside of Afghanistan and to safer territory. Political upheaval is another reason that supports the case for cryptos.
Kabul falls; A run on the banks is only one issue facing Afghanistan
Last week, the two-decade US and NATO presence in Afghanistan ended as it began, with the Taliban once again in charge of the country. It was the second time over the past four decades that a superpower failed to change Afghanistan, which will now return to a theocratic government under Sharia Law and the iron fist of Taliban Mullahs.
As of the end of last week, the US State Department estimates that thousands of US citizens and Afghanis that helped the US in the war effort against the Taliban remained in the country. The scramble to leave is a matter of life and death for many.
As the world has shut down the country’s access to funds, banks are shuttered, forcing those lucky enough to make their way to the airport for flights abroad to leave with nothing but the shirts on their backs. The run on the banks is the last thing on the minds of those fleeing for their lives.
Numerous examples throughout history where wealth evaporates
The situation in Kabul is the latest example of how a sudden political change can cause life savings to evaporate for those depending on the traditional banking system. Saigon in 1973 was another. In the 1930s, many people fortunate enough to leave Nazi Germany were forced to flee with nothing. While some of the wealthier refugees carried diamonds, gold, or other stores of value, what they could carry on their person limited the quantities.
The word refugee comes from the French for a displaced person. The world has a long history of those who seek refuge far from their homeland because of war, persecution, or natural disasters. The events that force people to flee tend to transpire quickly, making planning more than challenging.
In the event, transporting wealth is only a secondary consideration. For many, it is impossible as banks are not operating, and many investments are not transportable.
Cryptocurrencies are global
In the past, one of the leading arguments for holding assets like precious metals and diamonds has been they are small and have high value, making them easily transportable. Meanwhile, the technological revolution has made it far easier to keep and transfer wealth.
Cryptocurrencies transcend borders. They are fungible and exist in the cloud or cyberspace.
You cannot hold a Bitcoin or Ethereum token in your hand, which is a problem for some investors. However, that problem can be a benefit for those who suddenly find themselves refugees and own cryptocurrencies.
Aside from refugees, for those in countries where currencies are not convertible to dollars, euros, pounds, yen, or other freely traded reserve currencies, cryptocurrencies offer the ability to move their wealth abroad at any time.
Computer wallets travel well
Any amount of cryptocurrency can fit on a tiny flash drive while people are on the run. With a secure password, a cryptocurrency owner can access wealth on any computer worldwide.
Therefore, computer wallets in cyberspace are efficient wealth protection tools. It is likely that at least some of those escaping the Taliban’s clutches to start a new life elsewhere will have access to their savings via a stash of cryptocurrencies. We will hear a lot more about the utility of the asset class in the wake of the return of Afghanistan to the Taliban.
Moreover, the new leadership may have assets in cryptocurrencies that allow it to operate as the US and other governments have frozen over $9 billion in reserves.
Cryptos transcend politics and ideologies
Cryptocurrencies are a libertarian form of money that takes control from governments and central banks and returns it to individuals. Cryptos are apolitical in a highly political and ideological world.
In a January 2018 article on NASDAQ, the author outlined the ten reasons cryptos make the world a better place. The reasons include:
- Reducing the risk of fraud
- Increasing crowdfunding
- Changing the money transfer process
- Strengthening e-commerce
- Encouraging scientific advancement
- Accountability for companies and individuals
- Safer transactions and foreign money transfers
- A stable alternative to unstable currencies
- Returning control to money to individuals
- Scalability
In the wake of the Taliban’s control of Afghanistan, we can add another benefit; flight capital. A cryptocurrency wallet will ease the transition for refugees starting life over in a new and foreign land.