by Greg Barker
Wednesday, 15
September 2021

Buying Bitcoin may backfire on the Taliban

Its price is unpredictable from one day to the next
by Greg Barker
Taliban fighters discuss monetary policy in Kabul presidential palace

Following its botched exit from Afghanistan, the U.S. has launched a new, all-out offensive on the Taliban’s finances, halting cash shipments destined for Kabul, influencing the World Bank and the IMF to cut off financial aid, and blocking access to Afghan government accounts — which conveniently reside at the Federal Reserve.

For the world’s pre-eminent superpower, repressing the Taliban’s bankbook is just another day at the office. Over the last twenty years since-9/11, the U.S Treasury Department has grown into the largest, most devastating monetary armament, exercising its various offices, with alphabet-soup style names, to disrupt, dismantle, even destroy enemy financial networks.

From quashing bad banks that fuelled North Korea’s “Office 39” to cutting off Hezbollah-backed Iranian institutions from the global financial system, the Treasury’s “Eye of Sauron” has been a highly effective tool for the U.S. empire.

Now, though, it faces a new kind of adversary: cryptocurrencies, in particular Bitcoin. As the Biden administration continues to limit the Taliban’s financial ability to use U.S. Dollars in global trade, cryptocurrencies such as Bitcoin have been touted as a potential workaround.

But Bitcoin’s supposed benefits aren’t as sound you might think. It’s only anonymous or “censorship resilient”, for instance, if you’re not Ross Ulbricht, a Colonial Pipeline hacker, or anyone else the U.S. security agencies pursue with a vengeance.

What’s more, as a rogue state, partial anonymity is soon outweighed by Bitcoin’s instability as a currency. Essentially, you take on the unique risk of holding your reserves in a global currency free from regulation and oversight, which means any other entity across the globe can not only influence but monopolise Bitcoin. In turn, this would give said entity undue control over the cryptocurrency’s price.

While the dominant narrative portrays that Bitcoin has become the go-to hedge against inflation, causing the masses to pile in and drive up its price, we’ve seen rising speculation from individuals outside the mainstream crypto bubble, who claim only a few crypto insiders have been fuelling Bitcoin’s epic rally.

Ultimately, we don’t know whether Bitcoin’s price is going to drop or keep rising. Both sides remain adamant they are right, but nobody really knows who or what has been fuelling Bitcoin’s rapid rise. The crypto bear’s hypothesis — that crypto insiders have been fuelling the latest boom — is feasible, and if true, will prove disastrous for anyone who has adopted Bitcoin to skirt the legacy financial system. 

It’s almost inconceivable to imagine the impact of a scenario in which the Taliban use Bitcoin to bypass U.S. sanctions and watch their net worth plunge more than 80%. Then again, if Bitcoin does indeed ‘go to the moon’, and the Taliban takes a punt while other powers keep dismissing it as fool’s gold, we could see them become the next Saudi Arabia. Only this time, backed by a fluorescent-orange digital coin.

Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at @concodanomics.

Join the discussion

  • Great that this topic is being tackled but it lacks insight into what is actually possible because it limits discussion to Bitcoin.
    Crypto is much more than the volatile Bitcoin. Notably, most of the competition is really around challenging Ethereum, where smart contracts have allowed the development of a rich defi ecosystem, that rivals and innovates beyond traditional finance. It’s worth engaging with what that offers and revisiting the questions addressed in this article because there are crypto assets that do not have the drawbacks mentioned about Bitcoin.
    Stablecoins are intended to have a stable value. They range in all manner of properties – centralised ones are backed by $ in a bank account (usdc, usdt), decentralised ones can be pegged to the $ but backed by a volatile collateral (this works), and others like rai and float that are decentralised but not pegged to the $.
    This is an important topic to engage with but the media really needs to upgrade it’s understanding.

  • An interesting take on things, although some would argue that Bitcoin is a lot safer than the dollar, whose days as the global currency of choice are coming to a rapid end. Unlike Bitcoin, the dollar is infinitely dilutable and it is unlikely that Biden will turn off the printing presses that are devaluing the true worth of the dollar on a daily basis. It could be argued that using a currency that is volatile but trendng upwards makes more sense than using an old-school currency that is losing value each year.

  • Surely the days of comparing crypto currencies to tulip mania are long gone. You might be right, and I do have reservations, although at this stage I’d prefer to be long on bitcoin just in case.

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