The Securities and Exchange Board of India (SEBI) has recommended that “prominent public figure” should refrain from endorsing crypto assets.
Sources told BusinessLine that the watchdog has submitted its crypto recommendations to the Parliamentary Standing Committee on Finance. This includes SEBI’s take on crypto advertisements and possible violations of disclosure legislations despite there being no specific guidelines in the sector yet.
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The guidelines reportedly note: “Since this is a risky category (virtual digital assets), celebrities or prominent personalities who appear in such 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,”
Amendment to ASCI guidelines
In Feb, the government recognized the virtual asset sector but only in order to bring it within the taxation framework in the country.
Now the Finance Ministry has asked SEBI for its views on guidelines by ASCI, sources revealed.
From April 1, the Advertising Standards Council of India (ASCI) implemented a set of 12 guidelines around the promotion of virtual digital assets (VDA). The self-regulatory industry body had mandated publishing disclaimers on crypto advertisements warning that products are “unregulated and can be highly risky.”
In the latest, the report remarked that SEBI has recommended rewording the disclaimer, adding: “Given that crypto products are unregulated, prominent public figures including celebrities, sportsmen, etc. or their voice shall not be used for endorsement/advertisement of crypto products.”
The new guidelines not only aim to highlight potential crypto risks and concerns of fraud but also put the onus on the endorsing celebrity or sportsperson.
The SEBI recommendation makes them liable for violation of the Consumer Protection Act or any other law. Therefore, the refreshed disclaimer would also add that “dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc,”
Under this, the Consumer Protection Act, 2019 can also levy fines on the endorser for “misleading consumers.”
However, the celebrity will not be liable if “he/she has exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by him/her,” the report noted.
Global developments and Indian legislation
The development in India also comes at a time when actor Matt Damon is getting slammed once again for promoting digital assets, as the market continues to spiral downwards.
Damon and Crypto.com partnered earlier in the year to expand the platform’s promotional reach. However, now, the former is getting mocked for his “fortune favors the brave” advertisement that urged people to invest in the asset class.
Meanwhile, SEBI had also reached out to the government to expand its power on social media platforms.
The Economic Times noted that the securities regulator wishes to “intercept and decrypt data” on platforms like WhatsApp and Telegram to curb insider trading cases and track trading channels around crypto and other assets.
Meanwhile, the report stated that the Consumer Affairs Ministry is expected to soon release the updated crypto advertising guidelines under the Consumer Protection Act.
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