India’s draft bill proposes a 10-year jail sentence for using cryptocurrencies

Another type of demonetization like you pointed out.

It’s more of a move to control the narrative that the government is tough on “black money” and “terrorism”, since previous actions to bring back such wealth into the tax net and into the books flopped terribly.

Everyone except the government officials and politicians seems to know that undisclosed income and wealth are mostly held in real estate, gold and other assets. But this government has had a hatred for cash and cryptocurrency for a few years, and seems to believe that curbing cryptocurrency will solve the problems.

What’s completely absurd is the criminal penalty being talked about. There’s no law so far on cryptocurrency (except that banks were told by RBI not to work with companies in this area). What are people who have had these for several years to do? It’s all very short sighted, and looks like a deflection from other things.

I guess it's mainly about anti-State and pro-terror financing, which is a serious issue that plagues India.