Several exchanges in Herat Afghanistan close as ban on digital assets takes effect

Herat city police this month began enforcing a nationwide ban on trading in digital assets imposed by the central bank, Da Afghanistan Bank.

Sayed Shah Sa’adat, the head of the city’s police crime unit, said Bloomberg that more than 20 digital asset companies had been shut down. Police also arrested 13 digital asset dealers for defying the ban, most of whom were released on bail.

“The central bank has instructed us to prevent all money changers, individuals and businessmen from exchanging fraudulent digital currencies like what is commonly known as Bitcoin,” Saadaat said in a statement.

Herat, the third largest city in Afghanistan with an estimated population of over 500,000, has been a hub for digital asset trading. Four of the six major digital asset brokerage firms in Afghanistan are located in the region.

According to a local report, the people of Herat received the execution measure with mixed feelings. The leader of a local financial lobby group, Herat Money Exchangers Union, Ghulam Mohammad Suhrabi, backed the decision saying that digital assets should be banned as they are still widely misunderstood in the Afghan market. .

Meanwhile, another resident called for regulations and market surveillance to ensure Afghans make better investment decisions and don’t fall for scams.

Afghanistan and digital assets

The ban on digital assets by Da Afghanistan Bank had been predicted by some religious scholars, according to the Bloomberg report. Academics have argued that the Taliban would ban the asset class because it is considered “haram”, or off-limits to Muslims because it has elements of gambling.

This was after the Taliban-led government said it would study whether digital assets could be permitted under Islamic financial practices while considering options to revive the country’s slumped economy.

Meanwhile, an increasing number of the country’s residents are turning to digital assets since the Taliban took power last year. A BBC report found that digital assets have become one of the easiest ways to conduct cross-border transactions due to US sanctions against the country.

Prior to the Taliban takeover, the previous Afghan government was more receptive to supporting the economy with digital assets. In 2019, the central bank was considering issuing a digital asset bond.

Unlike Afghanistan, several other Muslim countries do not consider digital assets prohibited, including the United Arab Emirates, Qatar, and Bahrain.

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