How would capital controls work in the bitcoin era?
Right now, we have restrictions on how much FX an individual can transfer out of India. Since banks and authorized forex dealers are about the only way a person can procure FX, the government is able to monitor this.
Once bitcoins are easily available, what prevents a person from buying BTC and sending them across to another person outside India. Would you need an established and trusted 'hawala' operator to transfer funds outside India?
To put it mildly Bitcoin is a Internet currency, no borders no central control. So no Capital control.
Countries will have to adapt to the change in this environment.
They will no longer be in control.