I agree with you: there is no good reason why India would live without crypto. It doesn’t make sense. They are cutting off their nose to spite their face, as you said, most importantly by losing all the tax revenue they would have had if it were left legal. Again, like you said, they don’t even have to do any work (the hard work is done by the investor). All they have to do is tax! And the idea that it’s only for illegal purposes doesn’t hold water either, nor does the need to identify users since KYC has basically taken care of that. So what’s the deal? It’s a very good question to ask.

I kind of think that the real issue here is that the Indian government feels threatened by crypto. At least that’s the only ‘logical’ explanation that occurs to me (once the above mentioned possibilities are discarded). Otherwise, why else? And they’d be greatly mistaken to feel threatened if that is actually the case. I don’t think anyone would ever suggest that crypto will actually replace fiat. To be threatened by something that would coexist alongside would suggest feelings of great weakness . . .

. . . or great totalitarian desire.

The next thing would be to prohibit the ownership of gold.

Serious questions indeed.