Business 22 April 2019Derek Tonin
Afghanistan considers turning to crypto bonds to rebuild
Afghanistan has suffered from decades of strife, starting with the Soviet Invasion of the 1980s, followed by civil war, followed by the rule of the Taliban, and then more war. Hoping to use modern financial technology to rebuild, the country is looking to use cryptocurrency to help fund the construction effort.
The governor of the Central Bank of Afghanistan, Khalil Sediq, told Asia Times the country will issue a sovereign crypto bond to raise US$5.8 billion. It will do so by mixing Bitcoin Core (BTC) with metals futures, such as lithium. Afghanistan is estimated to have US$3 trillion in mineral reserves.
Afghanistan has to turn to these creative measures to fund its construction due to the reputation the country has in financial markets. The International Monetary Fund (IMF) has labeled the country as a high risk due to external debts. As a result, Afghanistan can’t borrow the money it needs from typical sources, and needs to use financial tools that offer a higher level of trust.
By selling bonds that are linked to its massive lithium reserves, which are already in high demand by companies building advanced batteries like Tesla, with a cryptocurrency like BTC, which allows some measure of protection against terrorist financing through its auditable blockchain, Afghanistan may be able to secure the funds it needs, Sediq hopes.
IMF director Christine Lagarde has supported the idea of blockchain based bonds in the past, but wants to see how such a system performs in a sandbox environment before embracing it on a larger scale. Considering Afghanistan has to convince the likes of Lagarde to get on board, they’ll want to show her they are building a strong system she can trust in.
Lagarde has also previously argued that a huge benefit of blockchain technology could be in fighting against criminals. If Afghanistan can use it’s scheme to show that its money is completely detached from bad actors that have plagued it’s past, it may finally be able to demonstrate to the world that it can join the world economy and build to a common future.
Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.
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