212
The Afghan situation is a mess, to the point where it could be described with any phrase starting with "Cluster".
But how could it impact crypto ?
Firstly, through it's economic impacts.
Afghanistan is (was) the recipient of significant amounts of international aid. It runs to billions of dollars every year including around $1.3Bn from the UN and another $600 million+ from the United States (excluding military aid). The Taliban taking power is likely to give the US, UN & IMF an excuse to turn off the taps. It'll hurt the Afghan people (and some very corrupt leaders...), but save the West a significant amount of money. That's money which will feed back into economies desperate for cash to pay down the costs of Covid borrowing. Some may even find it's way into the hands of private citizens who could use it to buy crypto !
The US and NATO spent huge amounts of money on Afghanistan's military as well as their own military operations. This may stop, ending a long-running drain on finances. But I wouldn't be surprised to see periodic air strikes on suspected Al Qaeda sites, as well as the US discreetly funnelling in weapons to create an anti-Taliban insurgency.
The Afghan economy is heavily aid-dependant, but the country itself has huge potential in terms of mineral resources; oil, copper, lithium and rare earths. The Taliban are unlikely to be able to capitalise on this, but China is showing strong interest in taking advantage of the US's misfortune by making deals with the new rulers to exploit the country's mineral wealth. Taking over another source of rare earths will maintain China's virtual monopoly over these minerals which are essential for producing so many high-tech items including computers. That's assuming the country doesn't spiral into civil war.
Afghanistan is an essential part of the jigsaw for China's Belt & Road initiative. If they can maintain some level of peace, they will be able to complete road and rail links from China to Karachi in Pakistan. This increases China's grip on international trade, further weakening the US position as well as trapping both Afghanistan and and Pakistan into repayment of massive debts to China.
There will also be significant strategic and geo-political impacts.
The most worrying is that China will be emboldened to act against other US interests and allies. If this takes the form of an invasion of Taiwan, because China thinks (probably rightly) the US will be unwilling and/or unable to respond, it means that the world's largest source of high speed microchips will cease to be available for all our mining rigs and computers. Never mind the strategic ramifications, that could mess up crypto in a big way !
Although we haven't seen what I call an "Adrianople moment" with a US army destroyed in a single battle, the US armed forces have been massively harmed by the involvement in Afghanistan. Their doctrine and equipment is skewed towards fighting counter-insurgency, morale has been badly hit, there is a culture of excessive risk avoidance and political interference is badly hitting their effectiveness. If the post-Vietnam experience is any guide, it will take over a decade for the damage to be undone, and the United States just doesn't have that much time.
The United States already appears to be moving to be a much more authoritarian state, with the tech giants working with the government to limit and control political debate, cancelling those with whom they disagree. The defeat in Afghanistan is likely to reinforce this tendency. This means we can expect more crypto-related regulation to emerge from the US treasury as they desperately try to grab cash from any source to pay for the costs of Covid. The other possibility is that the internal polarisation and stresses we've seen in America over the last few years could be exacerbated by the failure in Afghanistan to the point where the country fractures entirely, in a similar way to what happened to the USSR after they withdrew from Afghanistan.
Although China is also regulating crypto heavily, a potentially positive impact is that America's allies (even including the UK and other NATO allies) are seriously questioning whether the US is a reliable and credible partner. This is likely to translate into less willingness to accept US efforts to make their national laws into global regulations, meaning that countries will no longer just blindly follow the US lead in regulating crypto.
The US dollar is unlikely to be the main global reserve currency in 5 years time. Russia has divested all US dollar holdings, and China has made clear they want to see the Yuan replace the dollar as the global reserve currency. I can see countries seeing a US crackdown on crypto as a huge opportunity for themselves. It won't just be El Salvador making Bitcoin a national currency ! I see it as likely that Bitcoin (or maybe Eth) will become a reserve currency for countries wishing to stay neutral, as well as an effective reserve currency for individuals who don't want their finances tied to the fortunes of a single country. Encrypted blockchains could be powerful tools to avoid data harvesting (and possibly outright cyber-warfare) by the Chinese state and US tech giants.
All in all, we're in for a roller-coaster of a ride for the next few years as the US and China fight over which will be the dominant global power. But crypto and blockchain technology are likely to prove to be invaluable tools to help ordinary people and whole countries navigate around the collision between the two great powers.
