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.

The development is a part of the government’s plan to introduce a bill to ban private cryptocurrencies and introduce India’s own digital currency. While the government has proposed to promote technologies like blockchain, it seems concerned about individuals holding decentralised digital currencies like Bitcoin and Ethereum.

The government’s proposed plan has not gone down well with the border blockchain and crypto industry, which witnessed sharp growth in 2020. The industry has also said that banning digital currencies like Bitcoin and Ethereum is not possible.

Even if the government blocks the IP addresses of cryptocurrency exchanges, the measures may not be foolproof, according to industry professionals quoted in the report. They added that virtual private networks (VPNs) may be used by individuals to access the exchanges.

Giving an example, these industry sources said there are platforms promoting illegal Satta markers online and so far no action has been successful against them.

An industry expert quoted in the report said various routes — VPNs, peer-to-peer trading, using cash — can be used to buy and sell cryptocurrencies. Moreover, digital wallets outside India can be used to store and transfer these private digital currencies, using part of the money permitted to send abroad for investment within the liberalised remittance scheme limit of $250,000.

These are major loopholes that will continue to exist even if the government blocks the IP addresses of cryptocurrency exchanges.

Crypto exchanges have requested the government to not ban decentralised digital currencies as they could lead to a sharp rise in illegal trade. They instead want the government to regulate the sector and prevent any illegal activities.

Not only will it curb illegal activities but also provide a boost to global players who are developing blockchain technology. Therefore, regulating crypto trade could also make India an attractive destination for global blockchain firms.