Opinion: India’s Traditionalist Ban on Crypto

India banned cryptocurrencies in late April 2018 — this isn’t new news. What’s slightly newer news is that the country proposed a potential ten-year jail sentence in June for any civilian who engages with crypto. Though India is the largest and fastest-growing democracy in the world, when it comes to cryptocurrencies, it aligns itself more with countries like China and Russia.

For those new to it, cryptocurrencies — “internet money” — are separate from government-sanctioned monetary systems. Like fiat money — legal tender backed by the government that issues it — cryptocurrencies store value, are a medium of exchange, a unit of account, and are a standard of payment. They aren’t affected by the monetary shocks of an individual economy and can be viewed as a democratic tool, for the people by the people. They have been offered as an answer to India’s weak banks and an alternative to cash.

Cryptocurrencies are also particularly popular in countries with currency risk, such as Argentina and Turkey, because they are intended to be a more stable store of value. One example of a state-related shock is India’s demonetization in 2016, during which Prime Minister Narendra Modi took out ₹500 and ₹1,000 notes from India’s monetary system overnight, which constituted 86.4% of all of the country’s money. Bitcoin purchases increased by 20-30% during this time period.