Apart from other dangers, Cryptocurrencies also consume a lot of energy which is bad given the world energy crisis

The tulip mania took hold of Europe in the early 17th century and is widely described as the first financial bubble in history. In the 1590s, Carolus Clusius started planting tulips in his private garden at the University of Leiden which gave rise to tulip cultivation in the Netherlands. He devoted the latter years of his life to studying the mysterious tulip phenomenon known as tulip breaking, a strange occurrence in which the petals of tulips would change to multicoloured patterns. This strange phenomenon gave rise to the Tulip Mania as it was suddenly seen as a social symbol to own a tulip and at its peak, accounted for inflation; a normal tulip could be trading between $50,000 and $150,000, similar to bitcoin prices at its peak.

However, many years later it would be discovered that the strange phenomenon which gave rise to Tulip Mania was nothing but the result of a virus that infected the tulips. This could be seen as a direct comparison to the current cryptocurrency frenzy happening worldwide.

Since the mysterious Satoshi Nakamoto launched Bitcoin in 2009, cryptocurrency has only grown bigger and gained more traction. In this day and age of technology, cryptocurrency is widely viewed as a deregulated anti-establishment currency that gives the people power. Crypto supporters hail the fact that this form of currency takes the power of volatility, inflation, interest rates, and power to spend from the establishment and gives that power to the people since they can mine the supposed currency through blockchains.

However, this could not be further away from the truth and from the reality behind crypto. Bitcoin has a limited number of ‘coins’ that can be mined and as more ‘coins’ are mined the harder it will get to mine more and this has serious environmental complications. According to a study done by the Cambridge Center for Alternative Finance (CCAF), Bitcoin at its peak in 2021 consumed around 110 Terawatt Hours per year, 0.55 per cent of the global electricity production, equivalent to the annual energy draw of a country like Malaysia.

Given the energy crisis the world is facing today, the sheer wastage of fundamental commodity electricity is obscene. Nevertheless, this barely scratches the surface of the evil of crypto.

Post-2016 newer cryptocurrencies, crypto platforms, and non-fungible tokens have taken the space and have widely done the trick to promote the cryptocurrency and get investors for the ‘coins’ and ’tokens’ as crypto is emerging in India. However, as people come to terms with cryptocurrency, they understand how dangerous it is. Over the past year, the crypto market has lost over $2 trillion in market cap from its peak of $3 trillion in 2021. On the eve of launch of ‘digital rupee’ by RBI, it is not out of place to say that India under the leadership of Prime Minister Narendra Modi has been one of the first countries which struck a balance between promoting innovation, human adventure and endeavour via issuance of CBDCs for promoting digital payments using blockchain technology but also at the same time cautioning and protecting the general public from crypto mania.

Our failure as a system to recognise cryptocurrency as nothing but a Ponzi scheme is going to hurt the people most at risk as seen recently with the crash of FTX, where the majority of the losses were taken by people who put their life savings in crypto as an investment.

In 2018, the RBI banned all its regulated entities from participating in cryptocurrencies but the same was overturned by the Supreme Court in 2020 resulting in mushrooming of various existing crypto exchanges.

Going forward, apart from focusing on the menace of fraud, money laundering, private risks, etc., we should spell out the systemic risks posed by these instruments to the stability of the entire economy and populace at large. The cyber-attack on servers of All India Institute of Medical Sciences (AIIMS), Delhi where the breach has compromised personal data of three to four crore of patients and hackers have reportedly demanded an amount of 200 crore in cryptocurrency is a case in point.

In the history of financial bubbles, deregulation added with a sudden frenzy has given rise to numerous bubbles from Tulip Mania to the 2008 crash. Any legislation for regulation can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards. Until then, the only viable solution to protect the environment from massive energy surges, protect gullible retail investors from losing their life savings, and to crack down on the illegal activities happening across the internet is to either have a regulated cryptocurrency or ban all cryptocurrencies.

(The author is a Lok Sabha MP)