By Vikrant Rana and Ragini Ghosh
Advertisements for Virtual Digital Assets
In recent days, most of us have been afflicted by advertisements flaunting the benefits of investing in cryptocurrency, touting them to be a sure-fire scheme to earn thousands, even lakhs, in a matter of moments. Numerous cryptocurrency exchanges and apps have burst onto the scene and taken over aggressive advertising, especially in the online sphere, invoking customers to invest nominal amounts with a guarantee of enormous lucrative returns. These ads have been designed so cleverly to tempt and lure a curious consumer into speculating in these new fangled assets, that it is easy to forget just how volatile the market for cryptocurrency actually is and that it is a completely unregulated form of currency, with no regulatory fall-back option. In fact, these ads as well as corresponding social media hype is so effective regarding the subject matter, that one would be forgiven for having FOMO for not investing in crypto!
Virtual Digital Assets (VDA’s) encompasses cryptocurrency and NFTs (Non Fungible Tokens, another new form of virtual asset, comprising of authenticated ownership of a piece of digital art or media). With the on-set of metaverse compatible internet marketplaces, VDA’s have arrested everyone’s attention and have exploded in popularity over the last few years, fuelled by additional time spent by citizens on the internet owing to the effects of the global pandemic. While information and know-how about VDA’s has certainly been widely disseminated all across the internet as well as over recent news headlines and celebrity endorsements, it is however being seen that common knowledge about VDA’s among the general public is inadequate for making secure financial investments.
Additionally, the Budget 2022 introduced, for the first time, a taxation regimen with respect to crypto assets wherein there is now a flat 1% tax imposed on gains from crypto assets, and a 1% tax deducted at source on each crypto transaction.
It is, therefore, to ensure consumer safety, so that lay citizens do not enter into detrimental financial liabilities and undertake uncalculated risks, that ASCI has considered it imperative to regulate the proliferating advertising of such speculative and volatile financial products.
ASCI’s Objective and Statement
On February 23, 2022, the Advertising Standards Council of India (ASCI) came out with guidelines to regulate the advertising and promotion of VDA exchange and trading platforms and associated services, as a necessary interim measure while the Indian government continues to work on coming out with a comprehensive regulatory structure to control such assets. These guidelines have been formulated after extensive consultation with all stakeholders, including the government and are intended to come into effect for all VDA related advertisements and promotions post April 01, 2022. Additionally, advertisers and media owners must also ensure that all earlier advertisements must not appear in the public domain unless they comply with the guidelines, post 15th of April 2022.
ASCI has stated that: “Advertising for these products [VDA’s] has been very aggressive over the past few months. The Advertising Standards Council of India (ASCI) noted that several of these advertisements do not adequately disclose the risks associated with such products. In order to safeguard consumer interest, and to ensure that ads do not mislead or exploit consumers’ lack of expertise on these products, ASCI has extensively consulted with different stakeholders including government and the virtual digital asset industry – to frame guidelines for virtual digital asset advertising.”
Salient features of ASCI Guidelines on Ads for Cryptocurrency
The salient guidelines as released by ASCI are summarized below:
- 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.”
Such a disclaimer must be made in the following manner so that it is PROMINENT and UNMISSABLE by an average consumer.
- In print or static, equal to at least 1/5th of the advertising space at the bottom of the advertisement in an easy to read font, against a plain background, and to the maximum font size afforded by the space.
- In video, the disclaimer should be placed at the end of the advertisement against a plain background. A voiceover must accompany the disclaimer in text. The voiceover should be at a normal speaking pace and must not be hurried. In the case of long format video of over two minutes, the said disclaimer should be repeated at the beginning and at the end of the video. The disclaimer must remain on screen for a minimum of five seconds.
- In audio, the disclaimer must be spoken at the end of the advertisement. The voiceover should be at a normal speaking pace and must not be hurried. In the case of long format audio of over 90 seconds, the said disclaimer should be repeated at the beginning and at the end of the audio.
- In social media posts, such a disclaimer must be carried in both- the caption as well as any picture or video attachments. The disclaimer within the caption must be placed upfront at the beginning of the post. Where social media posts or advertisements have restrictions on text in the static picture, the disclaimer must be carried upfront in the caption before the fold.
- In disappearing stories or posts unaccompanied by text, the said disclaimer will need to be voiced at the end of the story in the manner laid out in points (a) or (b) above. If the video is 15 seconds or lesser, then the disclaimer may be carried in a prominent and visible manner as an overlay.
- In formats where there is a limit on characters, the following shortened disclaimer must be used “Crypto products and NFTs are unregulated and risky” followed by a link to the full disclaimer.
- The disclaimer must be made in the dominant language of the advertisement
- In addition to the above, all disclaimers must meet the minimum requirements laid down in the ASCI guidelines for disclaimers.
- 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 any partial or biased manner. 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). This information should be presented in a manner that is easily understood by the average consumer.
- 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 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 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.
VDA’s are indeed a revolutionary way of acquiring assets and wealth, specifically for the generations growing up with the Internet, and that in itself has sparked a great deal of curiosity among younger investors. However, it is important to keep in mind that VDA’s are complex entities and their transactional impacts have not yet been fully understood. Being an emerging channel of investing, it will require specific guidance and consumers must be hand-held at this stage through initial risks and advised to proceed with caution. Flashy advertisements which gloss over the negatives and pitch investing in VDA’s as a glamorous and lucrative financial option are dangerous lure for this section of consumers and they may end up making misinformed decisions which may in turn prove harmful for the economy as a whole. Additionally, being still unregulated, investing in VDA’s poses the significant risk of having no option for appeal or redress should things go wrong and speculations take a turn for the worse.
Thus, stipulating guidelines is an important step taken by ASCI to protect consumer interests and ensure that commercial entities dealing in such assets do not mislead consumers by implication, ambiguity, exaggeration or omission, and are not framed in a way that abuses their trust or exploits their lack of knowledge. That said, while these new ASCI guidelines will rightly be heralded as a much needed development, there are a few aspects in the rules which may be considered to be regressive. For instance, the prohibition of usage of the word “currency” in respect of advertisements for VDA products seems a tad unnecessary, as for instance, Bitcoin or Doge, at the end of the day, are Crypto-currency, and the same should not be sugar-coated.
The guidelines framed by ASCI will serve as an important interim measure for self-regulation of such advertising content until a legal framework is officially brought into place by requisite legislation.
 See: https://www.cnbc.com/2021/03/04/survey-finds-one-third-of-crypto-buyers-dont-know-what-theyre-doing.html as on February 28, 2022.