As per a source with knowledge on the matter the centre is contemplating to block internet protocol or IP addresses of exchanges or entities that are facilitating trading in cryptocurrencies. The move is part of the government's intention to bring its own digital currency similar to what China and other nations have come up with. Earlier, two months ago, the centre said it plans to introduce a Bill for banning private cryptocurrencies.
The government also has plans to support technology such as blockchain.
Nonetheless, industry people say that prohibiting decentralized currencies like bitcoin and ethereum is not doable.
The plan shall be put in place as and when the period of three to six months (to be decided) to offload all investments in crypto is over. This is to avoid any instances of panic selling.
The government has already restricted adult websites and several Chinese apps by blocking IP addresses. Industry professionals however said, "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".
VPNs or virtual private networks are known to offer services that are otherwise not accessible. Some of the platforms encourage illicit satta markets and till date no action has been fruitful against them.
"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", said an industry expert.
Thus considering such convincing reasons not favouring banning of decentralized currencies, Rashmi Deshpande, partner, Khaitan & Co, and legal consultant to leading crypto exchanges said, "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". And so, regulation will enable the government in having a precise taxation policy as well as get details on who trade and invest in such decentralized currencies.