The market regulator has proposed that prominent public figures should be held responsible for making such endorsements which is a possible violation of the Consumer Protection Act or any other law.
May 17, 2022 / 03:17 PM IST
The Securities & Exchange Board of India (SEBI) has recommended that no ‘prominent public figures, including celebrities and sportsmen,’ should endorse crypto products. The market regulator proposed that companies advertising cryptos and digital assets should also put up disclosures listing out possible law violations.
Last month, SEBI clarified its position on the subject with India’s Parliamentary Standing Committee on Finance when members put forth questions on various aspects of crypto. As a result, the market regulator submitted a detailed written response to the Parliamentary Panel.
The Advertising Standards Council of India (ASCI) had published crypto advertising guidelines in February and the Finance Ministry had urged the SEBI to share its stance on such ads.
In response, the SEBI reportedly said that, “Given that crypto products are unregulated, prominent public figures including celebrities, sportsmen, etc. or their voice shall not be used for endorsement/advertisement of crypto products.”
The market regulator further added that prominent public figures should be held responsible for making such endorsements which is a possible violation of the Consumer Protection Act or any other law.
As per the ASCI guidelines, all ads must carry a disclaimer saying, “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” Such a disclaimer must be made in the following manner so that it is prominent and unmissable by an average consumer, the advertising watchdog has said.
SEBI suggested that the given disclaimer by the ASCI must add the possible law violations in crypto transactions. “Dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc.”
Given the volatile nature of cryptos and consumer interest, SEBI’s proposal may not be completely unwarranted.
Over the last few weeks, the crypto market has witnessed a steep decline. There is unrest in the market caused due to TerraUSD’s Luna’s recent crash from $116 on April 5 to $O May 13, which depicts a 100 per cent decrease in its value. Moreover, world’s biggest cryptocurrency, Bitcoin has dropped 35.75 percent YTD and is currently at Rs 22.85 lakh. It has lost more than half of its value since it hit an all-time high of $69,000 in November last year.
Till now, crypto has not been regulated and has been declared virtual digital assets (VDA) for taxation purpose only. Since VDAs are a risky category, SEBI wants prominent personalities with a huge following to take special care and proper research about the statements and claims made in the advertisement, so as to not mislead consumers, especially the young.