The noise around private cryptocurrencies just got shriller after two major developments. First, the Chinese authorities stopped their banks from providing services related to cryptocurrency transactions. Second, Elon Musk, the founder of Tesla, executed a neat about-turn, saying that he would not accept Bitcoins as payment for the fashionable electric cars he produces. The two announcements cratered the market for private cryptocurrencies that have witnessed scorching growth in value terms over the past year. The crypto universe, which has operated outside the pale of regulations since 2009 when Bitcoin was first launched, has whipsawed in response to central banks’ actions to control a runaway beast that threatens to upstage fiat currencies as well as to cavalier statements by maverick tycoons like Mr Musk. Investors have been attracted by the prospect of capital gains in crypto trades like moths to a flame — with many of them badly singed while clinging desperately to a mother lode in search of a valuation peak.

The world of cryptocurrencies is poised to turn on its head as several central banks, including the Reserve Bank of India, pore over plans to launch their own digital fiat currencies. Some like China and the Bahamas have already introduced them in a small way. In January this year, the Bank of International Settlements said that 86 per cent of the 65 countries that had participated in a survey had indicated that they were exploring the drawback and benefits of launching a central bank digital currency. Many of them are flirting with the idea of offering the general public the option of holding their money in digital form. China has wider ambitions: it wants to see whether the digital yuan can thwart the dollarization of the world economy. Data show that more than 88 per cent of all international foreign exchange trades is carried out in US dollars against a mere 4 per cent in the Chinese yuan.

Countries have been vacillating between a total ban on private cryptocurrency transactions within their jurisdictions — like China — and the concept of light regulation — like Europe — which has been driven by the desire to bar only those segments that facilitate money laundering, terrorist financing and tax evasion. India set up a committee headed by the former finance secretary, Subhash Chandra Garg, which recommended that all private cryptocurrencies ought to be banned and only the one issued by the State should be allowed to function. The Garg report was submitted in February 2019 but the government is yet to decide whether to go along with its recommendations. In the interim, the RBI issued a directive in 2018 that barred banks from facilitating transactions between crypto exchange and their customers. That directive was shot down by the Supreme Court last year. Since then, the central bank has resorted to the tactic of subtle suasion to stop these transactions till the Centre takes a final decision. The risk of a complete ban is that these transactions could continue in the deep recesses of the Dark Net where regulation will become even more difficult.