Bank withdrawals and remittance systems were paralyzed even before Kabul fell, and Bitcoin emerged as the only means of transmitting value

For several weeks the eyes of the world were fixed on Kabul, Afghanistan. The photograph of refugees clinging to an aircraft was almost beyond a sense of reality. Meanwhile, on August 21, CNBC drew attention with an intriguing article: that amid Afghanistan's descent into chaos, expectations for Bitcoin and other cryptocurrencies were soaring.

The foreign report introduced a young man using Bitcoin to get his family out of the country; women who, with the help of an international organization, had learned a year earlier how to create Bitcoin wallets; and young people who had gone to Turkey to work and came to know Bitcoin because of the collapse of the Turkish lira that arrived together with the COVID-19 pandemic.

Even before Kabul fell into the hands of the Taliban, banks had suspended withdrawals, and Western Union and hawala (private money-transfer) services were halted indefinitely. In this situation, interest in Bitcoin and cryptocurrency soared. According to Chainalysis, Afghanistan ranked 20th out of 154 countries on the 2021 crypto adoption index. There is no proper exchange, but peer-to-peer trading is spreading.

A rope of trust connecting them to the outside world

The article was reported just before the tragedy at Kabul airport, but it hints that under Taliban rule Afghanistan's young people may find hope in cryptocurrency technology. Given that mobile phone penetration reaches 70 percent, Afghanistan's youth appear likely to make active use of Bitcoin and cryptocurrency technology as a means of resisting a return to the Taliban rule of 20 years ago. Bitcoin's uses are roughly as follows: concealing assets from the government or from looters; receiving aid from relatives abroad; emergency funds when fleeing the country; securing economic rights for women, which Islamic law forbids; and hedging against the inflation of the paper money the revolutionary government will print without restraint.

Skeptics who see Bitcoin as mere speculation may feel bewildered by the very fact that CNBC, a mainstream outlet, ran an article portraying Bitcoin as the hope of Afghanistan's young people. The conspiracy theory that Wall Street's big players are once again trying to pump the price of Bitcoin may be easier for them to accept. But there is nothing new about the fact that Bitcoin can do what traditional finance cannot. The mainstream media, the elites of the financial world, and the core officials of the monetary authorities already knew that Bitcoin has properties the existing financial system cannot easily approach.

To send money to a relative in a society where the borders are closed, the airport is paralyzed, and financial assets are frozen, one must send an object of value that carries finality of settlement. The objects of value that carry finality of settlement are cash and gold. In Afghanistan's case, dollars and gold. If you remit electronically using the financial system, finality of settlement is not guaranteed. The first thing a government in extraordinary circumstances shuts off is precisely the financial network.

The scene the CNBC article describes is the most intuitive possible explanation of finality of settlement. Even where banks, credit cards, and Western Union have refused service, Bitcoin can deliver an object of value without risk. Even those who believe Bitcoin will return to zero do not expect it to happen within a few months. Even they will come to admit that in order to help relatives under Taliban rule, sending Bitcoin is the best and almost the only method. For Afghanistan's young people, Bitcoin is a sturdy rope of trust that bypasses a government bent on rejecting modern civilization wholesale and dragging them back into the Middle Ages, and connects them with the world beyond their borders.

The regulator who was very nearly the first to mention this is Jay Clayton, former chairman of the U.S. Securities and Exchange Commission (SEC). In December 2017, when the Bitcoin and cryptocurrency fever and the accompanying regulatory controversy were at their height, he listed four characteristics of Bitcoin and cryptocurrency in a letter to Wall Street investors, and pointedly singled out finality of settlement. Although he borrowed the argument from Bitcoin's advocates, by declining to rebut it he maintained a neutral posture while hinting as strongly as he could at the potential explosiveness of Bitcoin technology. As an official who knew well the character of traditional financial networks - in which finality of settlement is routinely undermined by the state - he had no particular need to remark that Bitcoin's system, by its very nature, possesses finality of settlement. It was a remark liable to be misunderstood as a regulator of traditional finance hinting that Bitcoin is superior to the existing financial network.

There is something to the argument that this reads far too optimistically the mind of an official who, during his tenure, interpreted most initial coin offerings (ICOs) as unlicensed securities issuance and refused to approve a Bitcoin exchange-traded fund (ETF), thereby delaying the development of the industry. But former chairman Clayton never once spoke negatively about Bitcoin and cryptocurrency as such, even while in office. On the contrary, in a university lecture he said that "just because [ICOs] are prohibited now, one cannot conclude that they always will be." Considering his moves after leaving office, the more persuasive interpretation is that he knew, even while in office, that Bitcoin and cryptocurrency were a future that had already arrived.

Less than two months after stepping down, he signed a legal contract with a fund that had applied for a Bitcoin ETF. That is, as a lawyer for the very industry he had regulated, he accepted a legal advisory contract whose main work is persuading the organization he used to lead. In August he also signed a contract with a $2 billion crypto custody fund. Ripple, which is in litigation with the SEC, has gone so far as to petition the court that former chairman Clayton's pro-Bitcoin moves amount to a textbook "conflict of interest."

Former chairman Clayton is not the first former official to go from regulating cryptocurrency to working on behalf of the cryptocurrency industry. J. Christopher Giancarlo, who served as chairman of the U.S. Commodity Futures Trading Commission (CFTC) around the same time, works for Ripple. Prosecutor Kathryn Haun, who led the first cryptocurrency task force at the U.S. Department of Justice, turned Bitcoiner after wrapping up major crypto-related cases, and after stints at Stanford University and on the board of Coinbase is now the lead manager of a $2.2 billion crypto-dedicated fund. Benjamin Lawsky, former superintendent of the New York State Department of Financial Services, who drafted and passed the world's first "BitLicense" bill for Bitcoin businesses, now advises industry players on how to do business without running afoul of the regulations he himself created.

An irreversible upending of the board

To those who think Bitcoin will go to zero, or that cryptocurrency and blockchain are nothing but a passing fad, this nimble change of costume by former officials will look like nothing but apostasy - men for whom the honor of public service counts for nothing when money is at stake. But if we assume that they recognized the 2008 invention of Bitcoin as an irreversible upending of the board, their choices become understandable too. In office - where they had to accommodate the public's perception of reality and stand before the blade of a politics that lagged behind the times - they maintained as neutral a stance as possible and thereby bought time for a new industrial ecosystem to take shape; after retirement, they chose to devote the remainder of their lives to a rapidly rising industry rather than to an officialdom, a politics, or an academy that had fallen behind the times.

Even so, a regret remains. There are many countries on earth that will find themselves in a situation like Kabul's. If these men had held even a little warmth of heart for them, they could at least have offered a message: prepare Bitcoin so that you can survive the emergency when the financial network is paralyzed. What would have been the harm if it was a message of little interest to the citizens of industrial countries, who live surrounded by countless banks and do not even know how many credit cards are in their wallets? What if they had said that Bitcoin is of no use whatsoever in an industrial country, but that for individuals in a society in crisis it may, for a time, be extremely useful?

Skeptics are one thing, but the prudent people who put worldly advancement first often have hearts whose warmth is cruelly cold in comparison with the brilliance of their minds.

Oh Tae-min, author of "Bitcoin Was Strong" and "The Genealogy of Bitcoin Wisdom"