NEW DELHI: In a set of fresh guidelines issued on Wednesday, the Advertising Standards Council of India noted that several advertisements for virtual digital assets do not adequately disclose the risks associated with them given that promotions for these products has been aggressive over the past few months despite it being an unregulated industry in the country.
“Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” This is the disclaimer ASCI wants predominantly displayed on ads and promotions related to virtual digital assets like cryptos and non fungible tokens ( NFTs) from April 1, 2022.
Advertisers and media owners will also have to ensure that after April 15, all earlier ads cannot appear unless they comply with these guidelines. The guidelines require the disclaimer to be clearly read out for video ads and prohibit usage of words like ‘currency’, ‘securities’, ‘custodian’ and ‘depositories’. The advertisements are barred from showing minors dealing with virtual digital assets. Moreover, ads are not allowed to show virtual digital assets as a solution to money or personality problems or other drawbacks and should not promise or guarantee an increase in profits in the future.
Guidelines for videos, audio and social media posts
The guidelines also say that in the case of a long-format video of over two minutes, the disclaimer should be repeated at the beginning and at the end of the video. Also, 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.
For social media advertising, the 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.
What about influencers and celebrities? 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. For instance CoinDCX roped in actor Ayushmann Khurana for its campaign, “Future Yahi Hai” while CoinSwitch roped in actor Ranveer Singh as its very first brand ambassador.
"“We have seen a spate of advertising for virtual digital assets which could compromise consumer interest in the absence of some guardrails. The use of celebrities and high decibel advertising would attract consumers to these offerings, without full disclosure of the risks. Given that this is, as of now, an unregulated space, it is even more important for advertising to be upfront regarding the risks associated with these products. Globally, this is an emerging technology and products in the virtual digital asset industry have seen significant volatility. We believe with these guidelines, advertisements would be fairer and more transparent," said Manisha Kapoor, secretary general, ASCI.
Cost needs to be clear
Moreover, 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.
Late last year, the industry had faced flak from the government and was criticised for misleading advertisements across print medium, television and social networks. . Currently, the crypto players adhere to self-regulation under the guidance of IAMAI (Internet and Mobile Association of India) and BACC (Blockchain and Crypto Assets Council).
The guidelines come weeks after the Union Budget when the finance minister introduced a 30 per cent tax on gains from crypto assets and 1 per cent TDS on each crypto transaction.
So, what do these guidelines mean for the industry?
While some in the industry welcomed the move, saying it will improve credibility and transparency as well as bring cryptos one step closer to regulation, a few viewed the guidelines as yet another deterrent for the booming industry. Others thought it can disincentivise a certain set of investors. However, ASCI has clarified that its guidelines should not be read as a legal recognition or endorsement of the industry.
The guidelines will ensure investors are not misled
"These products have been heavily advertised in recent months. Some of these ads fail to fully communicate the risks. Concerns that investors are not fully informed about the risks associated with Variable Dearness Allowance prompted the guidelines (VDA). This is to ensure that investors are not misled and are fully informed. The standards also prohibit the use of terminology connoting a regulated market. Also, these guidelines bring the crypto industry one step closer to regulation," said Sonam Chandwani, Managing Partner, KS Legal & Associates.
No more misleading with zero-cost ads
Investors are often misled by advertising that entices them with zero-cost involved, which then leads them to make misinformed decisions. These guidelines have banned the use of such statements, ensuring that investors are fully informed about the costs involved. "The complete cost of the transaction must be made explicit, even the profitability figures, to ensure transparency in dealing," added Chandwani.
Will bring in transparency
"An educated crypto user understands the risk associated with this new emerging space. Adhering to ASCI guidelines is required for any financial product similar to mutual funds or any wealth management product. Being transparent and simplifying is the best way to clarify people about their investments," said Anshu Agrawal, Co-Founder of Flint.
Will ensure more creativity
"With the new tax rules and now ASCI’s regulations, I don’t think it will be challenging for digital products to be creative. In fact, this will bring out more creativity among the Web-3 people. When people came out with the concept of Cryptocurrency, it was laughed at, since it was new and seemed confusing. Likewise, the laws and regulations for cryptos will take time to be able to cover all bases. With web-3, we are enabling an additional asset class for the future. For sure, in the years to come, we are going to witness quirkier side of NFT & crypto projects than now," said Vjay Pravin, founder & CEO of bitsCrunch.
Brands will become more confident. Guidelines will improve credibility
"The ASCl guidelines will help brands/advertisements in the crypto and Web3 space to become more confident and comfortable, and will go a long way in improving their credibilities as well. It will also encourage users and investors to educate themselves and become more aware and alert before investing in crypto, NFTs or other kinds of virtual digital assets. Given that cryptocurrencies and NFTs have huge economic potential for our country in the near future, bodies like ASCI will also do well to introduce some educational portals or platforms that can provide right knowledge and awareness and enable the masses to make informed choices for such kind of new-age asset classes," said Om Malviya, President, Tezos India.
Will become impossible for startups to grow
“Advertising guidelines are respected but I strongly believe India and Indian government is yet to understand the economic force crypto and NFTs will add. Already web3 follows completely different principles of growth strategies and with these guidelines it will be nearly impossible for Blockchain startups to grow and add value from job creation to innovation in the country," said Amogh Tiwari, Founder and CEO of Deefy.co.
Nuances still need to be addressed
"The VDA industry is supportive of all efforts towards investor protection, however, there are nuances that need to be addressed as the space is ever-evolving. We will continue to work together with ASCI and other stakeholders to refine them further," said Ashish Singhal, Founder and CEO, CoinSwitch.
Guidelines similar to gaming industry, will build consumer confidence
“The guidelines, similar to what is expected of the digital gaming sector, focus on increased awareness amongst the users, and ensure that there is certain level of admissions being made to the end users right off the bat. Restriction on terms denoting linkages to fiat currency, adequate disclosures, due diligence by celebrities are a welcome step for building consumer confidence.” said Abhishek Malhotra (Managing Partner, TMT Law Practice).
More detailed guidelines for celebrity endorsements need of the hour
"Given the complexity involved in the crypto transactions, the unregulated nature, and the product disruptions being conceptualised and implemented in the various sectors using cryptos, tokens, and NFTs, the regulation for advertising was much needed. Apart from the disclaimers and content-related guidelines, the 'special care' onus thrust on the celebrities, prominent personalities who appear in the VDA advertisements is a step in the right direction. However, it is recommended to have detailed objective guidelines in this regard for celebrities to ensure adequate due diligence as well as safeguard their risks and liabilities, said Yashesh Ashar, Partner at Bhuta Shah & Co LLP.
