A geoblock, sometimes called an IP block, is a security mechanism used by cryptocurrency exchanges and crypto applications and services that limits access to those services based on the location of the user.
A simple example of a geoblock that many of you living in the U.S. have probably faced is when you try to sign up for an account at a crypto exchange based outside of the U.S. in a foreign country.
The crypto exchange has made the decision to operate outside of the regulations imposed by various U.S. government agencies, and in doing so, can’t offer its services to users connecting to the exchange from within the U.S.
Geoblocks implemented by crypto services like crypto exchanges usually block entire countries from connecting to their websites or mobile applications.
These blocks are accomplished by comparing a user’s IP address to a list of allowed and not allowed IP addresses.
IP addresses identify a person’s location in the world, and crypto services can use that information to block specific locations by country, region, state, city, or even just an individual IP address.
While geoblocks are easy to implement and generally keep away users from specific countries who aren’t allowed to access a company’s services, geoblocks can be easily worked around.
Virtual private network (VPN) connections can be used to mask your true location in the world, rendering geoblocks useless.
While VPN connections and services have become pretty mainstream, crypto companies are aware of the technology and now actively block the IP addresses of the VPN nodes and servers.
It’s a cat-and-mouse game, with new VPN providers appearing from all over the world, and crypto companies quickly working to block more IP addresses.
Crypto exchanges, specifically, are now requiring more personal information during registration that can be used to screen the user.
Requirements like a copy of your passport or a utility bill that includes your country of residence or home address are used as secondary filters for a user’s location. These requirements somewhat reduce the benefit of using a VPN connection to circumvent geoblocks.
Decentralized cryptocurrency exchanges (DEX) are hoping to gain more users by marketing the fact that they don’t require KYC information to register for an account. DEXs simply require that you connect using a funded crypto wallet to swap currencies or make a trade.