On-shore VASP in Afghanistan
Locally-incorporated VASP that operates under full local jurisdiction, holding all required licenses and registrations.
On-shore VASP is not permitted in Afghanistan.
Verdict Details
- Permitted
- no
- Local entity required
- No
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- No formal AML obligations can be lawfully met — the de facto Taliban administration has imposed a blanket ban on cryptocurrency trading since August 2022, deeming it 'haram' (forbidden in Islam) and a form of gambling/fraud.
- Under the pre-2021 AML/CFT framework (now functionally defunct), financial institutions would have been required to file STRs with FinTRACA, but FinTRACA's operational capacity and international recognition are severely compromised under the current regime.
- CDD/KYC obligations (customer identification, beneficial owner identification, ongoing monitoring, EDD for high-risk customers/PEPs) existed in the pre-2021 AML Law but are not enforceable for VASPs under the current ban.
- Record-keeping obligations (typically 5-7 years) from the prior AML Law are not applicable as no lawful VASP operation is permitted.
Key Restrictions
- Complete ban on cryptocurrency trading, exchange operations, and related virtual asset services — Da Afghanistan Bank (DAB) has declared all crypto trading illegal as of August 2022.
- The ban is enforced through police powers and religious decrees, not codified financial regulation — engaging in VASP activities carries risk of arrest and asset seizure.
- No regulatory framework exists for licensing, registration, or authorized operation of any VASP type.
- No travel rule, custody framework, or tax framework for crypto exists — the jurisdiction has no pathway to compliant operation.
Key Risks
- Arrest and prosecution risk: Multiple enforcement actions documented — in Herat province (August 2022), at least 16 crypto exchanges were shut down and individuals arrested.
- Severe lack of legal transparency: No published decrees, codified penalties, or due process — enforcement is arbitrary via verbal decrees and local police.
- Sanctions and illicit finance risk: Operating in Afghanistan exposes the entity to high risks of encountering sanctioned individuals or terrorist financing networks; the jurisdiction is financially isolated.
- Complete absence of banking infrastructure for VASPs: Banks are prohibited from servicing crypto-related businesses under DAB directives.
- No international recognition: The de facto government is not recognized by most countries or FATF, meaning any operator has no legal recourse or protections.
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
The current de facto Taliban administration's official stance, as widely reported since August 2022, is a ban on cryptocurrency trading, deeming it "haram" (forbidden in Islam) and a source of fraud. This outright ban supersedes any potential regulatory framework for VASPs.
Any entity attempting to operate as a VASP would be doing so outside of the law as enforced by the current de facto authorities.
Da Afghanistan Bank (DAB): Currently controlled by the de facto Taliban administration. It is the institution that has reportedly enforced the ban on cryptocurrency trading. Therefore, its role concerning VASPs is one of prohibition and enforcement of the ban, rather than regulation and oversight.
Custodial License Requirements: There are no specific custodial license requirements for digital asset custody in Afghanistan. The operation of any crypto-related business, let alone a custody provider, would be highly precarious and likely illegal under the current regime's informal decrees.
No. The FATF Travel Rule (Recommendation 16 for virtual assets) has not been adopted or implemented by any recognized governing body in Afghanistan.
Since the Taliban's takeover in August 2021, the Afghan government is not internationally recognized by most countries, including those participating in FATF. This means there is no legitimate regulatory framework or oversight body capable of adopting or enforcing FATF recommendations.
There is no crypto-specific tax legislation in Afghanistan. The current policy is a complete ban, not a regulatory framework.
Formal Ban Announcement: In August 2022, the Afghan central bank (Da Afghanistan Bank - DAB) officially declared all cryptocurrency trading illegal. The ban was reportedly driven by concerns over its use in gambling, fraud, and a perception that it is not compliant with Islamic Sharia law, as well as capital flight concerns in a struggling economy.
Enforcement targets specific bad actors (e.g., sanctioned entities, scam networks) and imposes compliance obligations on businesses, not the general public broadly.
Violation Type: Engaging in unauthorized and prohibited financial activity (trading cryptocurrency). The Taliban's acting central bank chief has called crypto "haram" (forbidden in Islam) and a form of "gambling.". Penalty Amount: No specific fine amount is publicly reported for this blanket ban. Penalties involve arrests, detention, closure of businesses, and confiscation of assets.
Outcome: Significant suppression of the cryptocurrency market in Afghanistan, forcing traders underground or to flee the country. Numerous arrests have been reported.
CoinDesk: Afghanistan’s Taliban Shuts Down 16 Crypto Exchanges, Arrests Dealers (August 23, 2022) - https://www.coindesk.com/policy/2022/08/23/afghanistans-taliban-shuts-down-16-crypto-exchanges-arrests-dealers/
Reuters: Afghanistan central bank bans online foreign currency trading, crypto (August 24, 2022) - https://www.reuters.com/markets/currencies/afghanistan-central-bank-bans-online-foreign-currency-trading-crypto-2022-08-24/
Al Jazeera: Taliban cracks down on crypto trading in Afghanistan (August 24, 2022) - https://www.aljazeera.com/news/2022/8/24/taliban-cracks-down-on-crypto-trading-in-afghanistan
Continuing Risk: The ban remains in effect, and anyone found engaging in crypto trading faces the risk of arrest and other punitive measures by the Taliban authorities.
Under the previous AML/CFT framework, financial institutions (including any future regulated VASPs) were obliged to report suspicious transactions to the Financial Intelligence Unit of Afghanistan (FinTRACA).
While FinTRACA technically still exists under the de facto administration, its functionality, independence, and engagement with international AML bodies (like the Egmont Group or FATF) are severely compromised.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- high
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Not permitted — the de facto Taliban administration has imposed a nationwide ban on cryptocurrency trading (deemed 'haram') since August 2022, with active enforcement through arrests and exchange closures, and no lawful licensing pathway exists for any VASP.
Questions this verdict aims to answer
- What license(s) are required to operate locally?
- What capital, governance, and reporting obligations apply?
- What is the application process and timeline?