Crypto is not a ‘currency” as per new ASCI guidelines on Virtual Digital Assets
The Indian government in its annual Budget presented for the financial year 2022-23 for the first time defined Virtual Digital Assets (VDA), which includes both crypto and NFT. The government also introduced a special provision to tax gain made on VDA trading by 30%. The reason for this tax was phenomenal rise of such transactions and magnitude of crypto transactions. In the recent times many crypto platforms have come up that offer “guaranteed returns” and use terms that are often associated with real assets to build trust among investors. The high decibel campaign that promises “get rich quick” is drawing investors to these digital assets. The millennials are particularly attracted to crypto trading despite market fluctuations and an uncertain legal status.
With crypto and NFT gaining traction in India, it was necessary to protect consumers to regulate advertising that do not mislead and coax them to invest into these riskier assets. With that in mind the India’s advertising watchdog, the Advertising Standards Council of India (ASCI) has after consultation process with stakeholders now rolled out guidelines for advertising and promoting VDA and 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”.
They have further specified the manner in which such a disclaimer must be made for different type 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 an 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 any partial or biased manner and the returns for period 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 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 advertisement 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.
These guidelines will be applicable to all VDA-related ads published on or after April 1, 2022. All earlier ads must also comply with the guidelines latest by April 15, 2022 to ensure their continued valid appearance in the public domain.
While the VDAs are not granted legal status in India, however, the rapid increase in the VDA advertisements on several print as well as digital platforms that feature celebrities and prominent personalities is on the rise. These guidelines are likely to provide clarity, restore consumer confidence and will improve accountability of those providing VDA services. Interestingly, the government wants to tax profits made on VDA trading (pegged at 30%) but maintain that these are unregulated assets.