Unless they stop all internet, they cannot stop us. If needed we can expand zcash/zerocoin and ignore their dictate.
Yes they absolutely can. If the government regulates all exchanges with transparency, reporting, management, liquidity requirements etc and shuts down or imprisons for non-compliance.... where will you trade then? You'll have no choice but the obey the dictate unless you plan to trade totally OTC. Blockchain technology is irrelevant to the regulation of exchanges.