Regulating the Indian economy is like squeezing a water balloon - whichever direction you squeeze from, you only make some other part fatter. If this ban went into effect, average people might comply and divest from crypto, but wealthy opportunists will always find a way to subvert government regulation through bribery and political connections.
Look at demonetization - people with large amounts of illicit funds would bribe bank managers to create thousands of new accounts in their name, to overcome the reporting/exchange limits. The aam aadmi (Hindi for common man) ended up with the short end of the stick, as the cash supply dwindled and people had to spend hours waiting at the ATM.
In many cases I would agree with you, but I encourage you to read about demonetization in India, as that is a good example of how regulation produced a worse outcome because of the unique forces at play within the country.
The people that hold assets and resources have things their way and face less consequences than those that don't. Always was the case, always will be..
This is certainly true in every country, but especially so in India. It doesn't matter how rich you are in America, you can't get away with serious crimes like murder (especially if there are witnesses).
In 1999, the son of a powerful Indian politician publicly murdered a bartender in cold blood with many witnesses. He was only convicted in 2006 after a massive media uproar, and was released from prison last summer.
I can't think of an example of someone in America who bought their way out of a murder they committed in a crowded nightclub with many witnesses. I don't mean to minimize your valid point about wealthy people buying their way out of trouble, but the magnitude of this problem is far greater in India.
Look at demonetization - people with large amounts of illicit funds would bribe bank managers to create thousands of new accounts in their name, to overcome the reporting/exchange limits. The aam aadmi (Hindi for common man) ended up with the short end of the stick, as the cash supply dwindled and people had to spend hours waiting at the ATM.