India regulates advertising of virtual digital assets
Virtual digital assets, including crypto and NFTs, are on the rise in India. Ranjan Narula, Abhishek Nangia and Daleep Kumar of RNA Technology and IP Attorneys examine the new ASCI guidelines regulating their advertising
In its annual budget for the financial year 2022-23, the Indian government for the first time defined virtual digital assets (VDA), including both cryptocurrencies and non-fungible tokens (NFTs).
The government also introduced a special provision to tax gains made on VDA trading at 30%. The reason for this tax was the phenomenal rise in and magnitude of crypto transactions.
In recent times, many crypto platforms have emerged that offer 'guaranteed returns' and use terms that are often associated with real assets to build trust among investors. A loud campaign that promises 'get rich quick' is drawing investors to these digital assets. Millennials are particularly attracted to crypto trading despite market fluctuations and its uncertain legal status.
With crypto and NFTs gaining traction in India, it became necessary to protect consumers by regulating advertising that could mislead them to invest in these riskier assets.
With that in mind, the Advertising Standards Council of India (ASCI) – India’s advertising watchdog – held a consultation process with stakeholders and then published guidelines on advertising and promoting VDA and related services. The key points of these guidelines are:
All ads for VDA products and VDA exchanges, or featuring 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.” The ASCI has further specified the manner in which such a disclaimer must be made for different types of advertisements (including print or static, video, audio, social media posts, disappearing stories or posts unaccompanied by text and formats where there is a limit on characters) so that it is prominent and unmissable by the average consumer.
The words ‘currency’, ‘securities’, ‘custodian’ and ‘depositories’ may not be used in advertisements of VDA products or services, 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 to customers in the marketing of VDA products from time to time.
Advertisements that provide information on the cost or profitability of VDA products 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 or transaction.
Information on past performance shall not be provided in a partial or biased manner and returns for periods of less than 12 months shall not be included.
Every advertisement for VDA products must clearly give out the name of the advertiser and provide an easy way to contact them (phone number or email).
No advertisement for VDA products or exchanges 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 VDA trading could be a solution to money problems, personality problems or other such difficulties.
No advertisement shall contain statements that promise or guarantee a 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 advertisement should downplay the risks associated with the category.
VDA products may not be compared to any other asset class that is regulated.
Since this is a risky category, celebrities or prominent personalities who appear in VDA advertisements must take special care to ensure that they have done their due diligence about the statements and claims made in the advertisement, so as not to mislead consumers.
These guidelines will apply to all VDA-related ads published on or after April 1 2022. All earlier ads must also comply with the guidelines by April 15 2022 to ensure their continued valid appearance in the public domain.
While VDAs are not granted legal status in India, there is a rapid increase in VDA advertisements on several print and digital platforms featuring celebrities and prominent personalities.
These guidelines are likely to provide clarity, restore consumer confidence and will improve accountability of those providing VDA services.
It is interesting that the government wants to tax profits made on VDA trading (pegged at 30%) while maintaining that these are unregulated assets.
Managing partner, RNA Technology and IP Attorneys
Partner, RNA Technology and IP Attorneys
Associate partner, RNA, Technology and IP Attorneys