Govt considers blocking IP addresses of cryptocurrency exchanges

The government is considering the blocking of internet protocol (IP) addresses of companies/exchanges on which trading in cryptocurrencies is happening, said a source in the know.

Two months ago, the government had said it intended to bring a Bill to ban private cryptocurrencies and introduce India’s own digital currency in line with what China and other countries had done.

This move is part of that.

The government had also proposed to promote technology like blockchain.
 

Industry, however, says banning decentralised currencies like bitcoin and ethereum is not possible.

The proposal will be implemented once a period of three-six months — to be decided — to exit all investment in cryptocurrencies is over. This will preclude panic selling.

The government has blocked adult sites and hundreds of Chinese applications.

However, industry professionals say “by doing so, the government may succeed in blocking known sources of platforms permitting trading and investment of cryptocurrencies. Still the measure taken will not be foolproof in successfully executing the ban”.

Virtual private networks (VPNs) are popular for providing services which are not otherwise accessible. There are platforms promoting illegal satta markets online and so far no action has been successful against them.

An industry expert said “various routes — like VPNs, peer-to-peer trading, using cash to buy/sell cryptocurrencies and use wallets outside India to store and transfer cryptos, using part of the money permitted to send abroad for investment within the liberalised remittance scheme limit of $250,000 can be diverted for buying cryptocurrencies — remain loopholes”.

In view of these compelling reasons against banning decentralised currencies, “exchanges have requested the government to regulate the sector. Regulating crypto assets will not only encourage genuine businesses but also ensure checks and balances for the sector to safeguard the interests of investors”, said Rashmi Deshpande, partner, Khaitan & Co, and legal consultant to leading crypto exchanges. She said regulation would help the government to have clear-cut taxation policy, get information on those who trade and invest, etc.

Regulating the crypto industry will give confidence to global players developing blockchain technology and which see India as a potential destination for investing here. The financial sector has huge potential for blockchain.