NEW DELHI : Advertisements for digital assets must prominently display that trading in them can be “highly risky", and celebrities must do their due diligence before appearing in these ads, the advertising regulator said.
These are among guidelines issued by the Advertising Standards Council of India (ASCI) on Wednesday for all virtual digital assets (VDAs), except currencies.
From 1 April, any ad for a digital asset carried on a print, TV, audio, or digital platform must carry the following warning: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions."
The disclaimer must be prominent and unmissable. Details include rules on the font size, backgrounds, voice overs, captions and use of languages, among other aspects.
ASCI’s new rules aim to prevent companies from making misleading claims about returns from crypto assets to lure investors. The popularity of crypto assets and virtual currencies has also led scammers to promote fraudulent cryptocurrency schemes.
India’s central bank has repeatedly voiced its concerns over the trading of crypto assets, likening it to Ponzi schemes and the Dutch tulip bulb market bubble. While the Reserve Bank of India described the private digital tokens as having no underlying value and being worthless, it plans to launch the digital rupee next fiscal year to promote financial inclusion.
The guidelines also prohibit the use of the words “currency", “securities", “custodian", and “depositories", as consumers associate these with regulated products.
A virtual digital asset is any information, number, token or code that is not a currency and is generated through cryptographic means. They can include NFTs, one-of-a-kind digital assets, without a tangible form, such as a unique digital work of art. ASCI’s guidelines were released after elaborate consultations with the government as well as the digital assets industry against the backdrop of the government proposing a 30% tax on gains made from trades in cryptocurrency.
Cryptocurrency exchanges caught the government’s attention and the ad regulator when they started splurging on advertising during the last season of the Indian Premier League cricket tournament that is widely watched in India.
The ad regulator said 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. Neither can the ads showcase VDA products or VDA trading as a solution to money problems, “personality problems", or carry statements that promise or guarantee profits.
Nothing in the ad should downplay the risks associated with the category, ASCI said. VDA products cannot be compared with any asset class which is regulated.
Keyur Patel, chairman and co-founder of GuardianLink, an NFT marketplace, agreed that crypto as an investment class was more volatile than stocks or real estate.
“NFT is not a financial asset but a digital one associated with games, entertainment, and art. Its inherent value is either in art or utility. So, the buyer of NFTs doesn’t buy because there are instant gains but their affinity towards celebrities or personalities. Since crypto is purely a trade asset meant for investments, it needs aggressive education to ensure that the expectations of returns for the buyers are not skewed by hype and unrealistic aspirations," he said.
