KABUL (BLOOMBERG) - Afghanistan's central bank imposed a nationwide ban on cryptocurrencies this month and the Taliban regime has arrested several dealers who defied orders to stop trading digital tokens, according to a senior police official.

The crackdown comes after some Afghans turned to cryptocurrencies to preserve their wealth and keep it out of the Taliban's reach.

Crypto has become a popular way of moving money in and out of the country, which is shut off from the global banking system due to sanctions levelled on the militant group.

While countries from Singapore to the United States are tightening crypto regulations in the wake of a market crash that wiped out some US$2 trillion (S$2.8 trillion) of wealth and drove several high-profile firms into bankruptcy, outright bans are much rarer.

Afghanistan now joins China, which declared all crypto transactions illegal in September 2021.

"The central bank gave us an order to stop all money changers, individuals, and businesspeople from trading fraudulent digital currencies like what is commonly referred to as Bitcoin," Mr Sayed Shah Saadaat, head of criminal investigations at the police headquarters in Herat, said by phone.

Mr Saadaat said 13 people were arrested, most of whom were released on bail, while more than 20 crypto-related businesses have been shut down in Herat, Afghanistan's third-largest city and a hub for trading in digital tokens.

Four of the six crypto brokerages in Afghanistan are located in the city, some 120km away from the Iranian border.

A report last year by blockchain research firm Chainalysis ranked Afghanistan as one of the top 20 countries in the world in terms of crypto adoption.

The results were weighted by purchasing power parity per capita, which favours poorer nations.

The Taliban in February said it would study whether digital tokens can be allowed under Islamic financial practices, as it was looking at all options to revive the economy, which collapsed after last year's messy withdrawal of US forces paved the way for the group to seize control.

Some religious scholars had long predicted that the Taliban would end up banning crypto because itis considered "haram", or forbidden to Muslims, as it has elements of wagering and uncertainty.

However, other Muslim-majority countries have taken a more lenient approach.

The United Arab Emirates allows crypto trading in Dubai's free zone, while Bahrain has backed digital assets since 2019.