The other predictable occurrence in the world of cryptocurrency was yet another avowal by India’s government to ban it through a proposed legislation, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, and also set up a legal structure for an “official digital currency”. While the latter step is laudable, the former seems to be a response Luddites would love. India tried to ban cryptocurrency once before, in 2018, before it was reversed by the Supreme Court. The Bill promises to “allow for certain exceptions to promote the underlying technology of cryptocurrency (blockchain, we presume) and its uses.” But this is precisely why it gives rise to the belief that the government has not understood the technology. The way the technology is built, an ownerless, consensus-driven, distributed ledger like a blockchain needs cryptocurrency to grease its wheels. To be interested in blockchain, not Bitcoin, is like saying that you are interested in the economy, not money.

This step has many ramifications. One is how it will kill innovation. Blockchain, along with artificial intelligence, augmented/virtual reality and internet of things, is seen as a technology that will shape the future. India has more than 30,000 blockchain innovators and practitioners, according to Akshay Aggarwal, founder of Blockchained India, and they will now be looking at moving out to friendlier regimes like the US, Switzerland, Singapore and Estonia. International tech companies will freeze blockchain and crypto-exchange investments and the step will undermine India’s reputation as a technology hub. India is the second-largest Bitcoin trading nation in Asia, and all those trades will move to overseas exchanges. The thing with digital technology is that you actually cannot shut it down. It just moves elsewhere. To shut down cryptocurrency, you will have to shut down the internet. Sumit Gupta, chief executive officer, CoinDCX, notes that China has large crypto trading and mining operations, and an Indian ban on Bitcoin will leave that space open for it. Also, Bitcoin is called ‘digital gold’ for a reason—it is limited, fungible, and a potential store of value. If this were to emerge as a global currency reserve, as gold did in the previous century, a ban could be suicidal.

No doubt, there are many problems with cryptocurrency—it is volatile, sucks energy, and is often abused by criminals. But the answer is not to ban it, but regulate it. Meanwhile, just as India’s Bill was being drafted, Twitter co-founder Jack Dorsey tweeted this: “JAY-Z/@S_C_ and I are giving 500 BTC to a new endowment named to fund #Bitcoin development, initially focused on teams in Africa & India….”