India's advertising watchdog, the Advertising Standards Council of India (ASCI), has finally issued guidelines for advertising or promoting virtual digital assets, like cryptocurrency and non-fungible tokens (NFTs), and linked services.
The crypto and NFT market in India is largely unregulated, leading to concerns over misleading marketing and the targeting of retail (non-professional) investors, who may not be fully aware of the risks.
Among other things, the document, issued on Wednesday, said that all virtual digital asset (VDA) products and services should carry a disclaimer: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”
The new rules will be applicable to all advertisements released or published on or after 1 April 2022.
'Unregulated, Highly Risky': ASCI’s 12-Point Guideline
Here are the guidelines that ASCI issued on virtual digital assets, abridged:
All ads related to VDAs must carry the following disclaimer:
“Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”
This disclaimer must be made in a way that it is prominent and unmissable by an average consumer. ASCI has specified how the disclaimer should look in the print, video, audio, social media posts and stories in the document.
The words “currency”, “securities”, “custodian” and “depositories” may not be used in advertisements as consumers associate these terms with regulated products.
The information contained in advertisements shall not contradict the information or warnings that the regulated entities provide.
Advertisements shall contain clear, accurate, sufficient and updated information. For example, “zero cost” will need to include all costs that the consumer might reasonably associate with the offer.
Information on past performance shall not be provided in any partial or biased manner. Returns for periods of less than 12 months shall not be included.
Every advertisement must clearly give out the name of the advertiser and provide an easy way to contact them.
No advertisement may show a minor, or someone who appears to be a minor, directly dealing with the product, or talking about the product.
No advertisement may show that VDA products or trading could be a solution to money problems, personality problems or other such drawbacks.
No advertisement shall contain statements that promise or guarantee future increase in profits.
No advertisement may show that understanding VDA products is so easy that consumers do not have to think twice about investing. Nothing in the ad should downplay the risks associated with the category.
VDA products may not be compared to any other asset class which is
Since this is a risky category, celebrities or prominent personalities who appear in VDA advertisements must take special care to ensure they don't mislead customers.
‘A Need To Protect Consumer Interests’
In the preface to its guidelines, ASCI noted that crypto and NFT-related products are a relatively new and an evolving form of investments.
"There is a need to protect consumer/investor interests as users may not be aware of risks arising from this form of trading and investment," it said, "The market for VDAs is not regulated and can be very volatile, since it is usually not backed by any tangible assets."
"In order to ensure that consumers who deal in VDA products are fully aware of the risks, and are not misled, ads must comply with the ASCI Guidelines."ASCI
Since ASCI is a self-regulatory body, not a judicial or statutory body, its guidelines are not legally binding. If someone flouts its rules, it publicly announces the names of those in violation. It also escalates such cases to the relevant government regulator like the Central Consumer Protection Authority (CCPA).
According to a Moneycontrol report, Indian courts have taken a view that ASCI members are contractually bound to comply with the guidelines.
Boom in Ads and Scams
India's cryptocurrency market grew 641 percent from July 2020 through June 2021, according to a report by crypto-analysis firm Chainalysis.
This explosive growth has led to a flood of advertisements by cryptocurrency platforms like CoinDCX and CoinSwitch Kuber, which have roped in Bollywood stars like Ayushmann Khurrana and Ranveer Singh.
Indian crypto exchanges spent 50 crore in advertisements during the ICC World Cup, according to The Economic Times.
Most of these ads imply that Crypto is easy to understand and is a safe investment which will offer stellar returns. “Bahut hard kuch nahee hai, sab simple hai,” says Ranveer Singh in an ad for CoinSwitch Kuber, “Lag ja re CoinSwitch pe, kuch toh badle ga!”
The crypto boom has also led to a growing number of crypto-related scams, which often involve phishing or tricking people into spending on obscure or fake cryptocurrencies.
In the first week of February, India’s Enforcement Directorate conducted several raids as part of an investigation into a massive crypto scam that involved a fake crypto called Morris coin that was floated to dupe millions of investors in Kerala, Tamil Nadu, and Karnataka of over Rs 1,200 crore, Mint reported.
In January, the official Twitter handle of Prime Minister Narendra Modi was briefly hacked and a message was posted claiming that India has “officially adopted bitcoin as legal tender. There was also a link posted with it.
The Reserve Bank of India tried to ban cryptocurrencies in 2018 but was blocked by the Supreme Court. The government subsequently started work on a cryptocurrency Bill which seeks to prohibit all private cryptocurrencies in India and only allow for certain exceptions to "promote the underlying technology of cryptocurrency and its uses."
The Bill hasn't been tabled in Parliament yet.
(With inputs from Mint and The Economic Times)