The Securities and Exchange Board of India (SEBI) has recommended that no ‘prominent public figures, including celebrities and sportsmen,’ should advocate crypto items, and that the advertisement disclosure should also discuss any legal violations.
Cryptocurrencies are still unregulated and have been designated as virtual digital assets (VDA) for tax purposes alone.
When members of the Parliamentary Standing Committee on Finance questioned authorities about various elements of cryptocurrency last month, SEBI informed them of its position, according to sources. The regulator has now given a detailed written answer. According to sources, the Finance Ministry has also requested the regulator for its thoughts on advertisements and has forwarded guidelines from the Advertising Standards Council of India (ASCI).
“Given the unregulated nature of crypto products, famous public personalities such as celebrities, athletes, and others, or their voices shall not be used for endorsement/advertisement of crypto products,” SEBI said, according to a source. It further stated that any significant public figure who makes an endorsement in contravention of the Consumer Protection Act or any other legislation will be held accountable.
After explaining about danger and no legal remedies available for fraud, SEBI proposed rewording the disclaimer provided by ASCI by adding “dealings in crypto goods may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc.”
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‘Impeding right to earn’
“A complete restriction on advertising a single sector is one thing,” Lloyd Mathias, Business Strategist, and Independent Director remarked. However, since the product is not prohibited from being advertised, identifying who can or cannot endorse the product is irrelevant.” He went on to say that this could obstruct any public figure’s fundamental right to earn.
Prime Minister Narendra Modi chaired a meeting in November amid a flood of crypto adverts featuring celebrities, and it was unanimously agreed that attempts to mislead the youth through over-promising and non-transparent advertising should be stopped.
Following that, the ASCI met with several stakeholders, including the government and the VDA industry, to develop advertising and related services guidelines. These were announced in February and took effect on April 1st.
“Because this is a dangerous category (VDAs), celebrities or significant individuals who feature in such commercials must take extra precautions to ensure that they have done their due diligence on the statements and claims made in the advertisement,” according to the guidelines.
Penalty for misleading advertising
The Consumer Protection Act of 2019 also places the onus of proof on celebrities in all advertisements. If an advertisement is deemed to be incorrect or misleading, the Central Consumer Protection Authority can order the manufacturer or celebrity endorsers of the product to remove or change the ad.
For the first incident of a false or misleading ad, the CCPA can impose a penalty of up to ten lakh on the celebrity endorser, with fines increasing to fifty lakh for any subsequent instances of false or misleading statements in ads.
For up to three years, it might also bar celebrities from endorsing any other items. “No endorser shall be liable to a penalty if he or she has taken due diligence to check the veracity of the claims made in the advertisement regarding the product or service being promoted by him or her,” it continues.
The Consumer Affairs Ministry is also anticipated to complete the Consumer Protection Act’s standards for preventing deceptive marketing soon.