The recommendation comes after Facebook announced plans to launch Libra, a new global digital currency that would make the transmission of money across the world as simple as sending a text message or image.
But an Indian finance Ministry panel that was appointed to study virtual currencies and suggest actions to contain their proliferation recommended that they should be banned given their inherent risks and price volatility.
The panel also suggested adopting a distributed-ledger technology (DLT)-based system for banks and other financial institutions.
India is the largest market for Facebook, with over 270 million users. India also has a huge Twitter following with around 34.4 million users in 2019, which would have given Facebook a push to its digital currency.
Besides Facebook, Visa, Uber and Andreessen Horowitz have partnered to promote the open-sourced Libra Blockchain.
India’s central bank, the Reserve Bank of India, has banned regulated entities from providing services to crypto business.
New Delhi had been working on legislation to ban crypto currency, including jail terms of 10 years for holding, selling or dealing with cryptocurrencies. It stressed that the Reserve Bank of India or the government has not authorised any virtual currencies as a medium of exchange.
The government has previously cautioned people against use of virtual currencies, including Bitcoin, warning of the investment risks associated with such currencies.
“There is a real and heightened risk of investment bubble of the type seen in ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money. Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes. VCs (virtual currencies) are stored in digital/electronic format, making them vulnerable to hacking, loss of password, malware attack etc. which may also result in permanent loss of money. As transactions of VCs are encrypted they are also likely being used to carry out illegal/subversive activities, such as, terror-funding, smuggling, drug trafficking and other money-laundering Acts,” warned the Indian Finance Ministry way back in December 2017.