In the first part of this series, we recounted India’s regulatory response to cryptocurrencies. We then highlighted traditional arguments supporting regulation and explored the difficulties regulators face, namely that cryptocurrencies do not constitute a single, uniform asset class. We argued that its plurality complicates attempts to regulate them within existing legal frameworks.

Before turning to the regulatory question in greater detail, it is useful to step back and examine how this ecosystem has evolved. The transformation of cryptocurrencies from Bitcoin’s originally envisioned electronic cash system to the far more complex ecosystem that exists today provides important context for understanding how these systems operate,…