The call to put its cryptocurrency to good use during an event in Miami. Real economic applications outside of investment speculation are still rare for cryptocurrencies.
(Photo: Reuters)
Bangkok Investment legend Warren Buffett has nothing to do with cryptocurrencies. Even if you were to sell him all the Bitcoin in the world for $25, he wouldn’t be interested, the Berkshire Hathaway boss said at his company’s annual general meeting in Omaha over the weekend: “What should I do with it?” The only value of the coins am hoping to find a buyer who will bid more for them.
Unlike trading in companies, company shares, commodities and many other asset classes, cryptocurrencies require a longer answer to the question of what value a transaction offers. And Buffett, the 91-year-old multi-billionaire, hits a sore spot with crypto influencers, most of whom are many decades younger.
13 years after the first bitcoin was mined, the social benefit of the future technology remains questionable. Shopping with cryptocurrencies doesn’t catch on even in a country like El Salvador, which has bitcoin as legal tender.
The digital currency is hardly suitable as a store of value in view of the enormous fluctuations. As a rule, pure speculative transactions remain – or the possibility of concealing dubious and illegal transactions.
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However, Buffett’s fundamental criticism overlooks a crypto use case that actually makes the lives of the people involved better. This can be observed in Afghanistan. The trigger for the development are the Taliban, who have been in power again for a year.
Since the extremists took power in Kabul by force, the interest of the Afghan people in digital currencies has increased sharply. The radical Islamists have driven the country into political and economic isolation. Crypto transactions have become an almost indispensable tool for at least part of the population.
Saffron vs Bitcoin
Behind this is the extensive collapse of the regular financial system. Due to the exclusion from the international payment system Swift, transfers from abroad to Afghan banks are almost impossible. Around $7 billion in central bank reserves were frozen by the US. This has dried up cash flows within the country, making it difficult for residents to access the money in their accounts.
In such a situation, digital currencies become an economic pillar: A saffron exporter from Kabul, who delivers to the USA, Great Britain, Canada and Australia, claims to be 90 percent paid in Bitcoin. Local broker Maihan Crypto is helping businessmen fearing Taliban seizure transfer their cash reserves to crypto accounts. And female students receive digital currencies from foreign aid organizations as regular support. Coins are exchanged for the local currency at crypto exchange offices.
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The market researcher Chainalysis lists Afghanistan in its “Global Crypto Adoption Index” among the top 20 – taking into account the transaction volume in relation to per capita purchasing power. However, crypto has not arrived in mainstream society, only a fraction of the population has access to the Internet at all.
Anyone who can trade with digital currencies has to accept high fees when exchanging them for local currencies. Bitcoin and other cryptocurrencies are particularly attractive because there are almost no alternatives given the financial sanctions and the loss of trust in the banks.
An extreme situation in which Warren Buffett would possibly also use the opportunity to bring part of his assets to safety with crypto aid. However, it is to be hoped that the conditions under which digital currencies are actually of great benefit – international isolation, a financial collapse and state arbitrariness – will be spared as many people as possible for a long time to come. And one can only hope that the Afghans will soon be able to rely on their banking system again.
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