A Brief Update on the ASCI’s Guidelines for
Advertising of Virtual Digital Assets in India
The Advertising Standards Council of India (“ASCI”),
the advertising industry’s self-governing body recently issued ‘Guidelines for the advertising of Virtual Digital Assets
and linked services’
(“Guidelines”), a first of their kind in India. The Guidelines came into
effect on April 1, 2022 and are applicable to all new advertisements on virtual
digital assets released or published after this date. Additionally, existing
advertisements on virtual digital assets (advertisements made earlier than
April 1, 2022) have to be made compliant with the Guidelines by April 15, 2022.
While the ASCI is a self-governing body and these
Guidelines are not binding, several major players in the industry have
voluntarily become members of the ASCI and so these Guidelines have the
potential to become the most broadly accepted standards with regard to
advertising of virtual digital assets in India.
Virtual digital assets (“VDAs”) have been
defined in the Guidelines as, “any information or code or number or token
(not being Indian currency or foreign currency), generated through
cryptographic means or otherwise, by whatever name called, providing a digital
representation of value exchanged with or without consideration, with the
promise or representation of having inherent value, or functions as a store of
value or a unit of account including its use in any financial transaction or
investment, but not limited to investment scheme, and can be transferred,
stored or traded electronically”. The Guidelines further clarify that VDAs
also include what are commonly referred to as crypto products or non-fungible
tokens (NFTs).
Until these Guidelines were issued, the ASCI’s general
‘Code for Self-Regulation of Advertising Content in India’ as well as
the Consumer Protection Act, 2019 were largely relied on by advertisers of VDAs
to fill the lack of regulation in this area. One reason for formulation of the
Guidelines was the flak faced by the industry regarding the misleading nature
of existing advertisements for VDAs. For instance, the advertisement run by Bitbns,
a crypto exchange, guaranteed a 4x increase in returns on its Bitcoin fixed
deposit vis-à-vis returns availed on bank deposits, and the advertisement by
CoinDCX, another leading crypto exchange in India, included terms such as
‘simple’ and ‘safe’, while also running a contradictory disclaimer to the
effect that cryptocurrencies are unregulated and not legal tender in India.
Some of the important standards set by the Guidelines
in relation to the advertising of VDAs are:
·
All
ads for VDAs, whether in print, video or audio formats (including social media
posts) would have to carry a disclaimer that “Crypto products and NFTs are
unregulated and can be highly risky. There may be no regulatory recourse for any
loss from such transactions.” The Guidelines stipulate certain conditions
regarding the placement of this disclaimer for each format. In addition to
these stipulations, the disclaimers must meet the minimum requirements as set
out in the ASCI’s general guidelines for disclaimers, i.e., disclaimers may be clarificatory in nature but
should not contradict the claim made in the advertisement, disclaimers should
not conceal material information resulting in the advertisement being deceptive
in nature with regard to its commercial intent, disclaimers should not correct
or qualify a misleading claim made in an ad, and disclaimers should adhere to
certain placement and format requirements set out in the disclaimer guidelines.
·
The
disclaimer must be in the dominant language of the ad, and words such as
‘currency’, ‘securities’, ‘custodian’ and ‘depositories’ should not be used
while advertising VDA products or services.
·
Ads
should not contain information that is contrary to information or warnings that
may be provided to customers on VDAs by regulated entities from time to time.
·
Ads
should provide accurate information regarding cost/profitability of VDAs and
their performance, and should not contain any guarantees regarding future
profits, or give any indication that VDAs may be considered solutions to money,
personality or other problems.
·
Returns
of less than 12 (twelve) months shall not be relied on to advertise the past
performance of VDA products.
·
VDA
ads should not show minors trading or otherwise discussing such products, and
celebrities involved in such ads should not make statements that are misleading
to customers.
·
The
ads should not compare VDAs to any regulated asset class so as to create the
impression that VDAs are regulated assets.
·
VDA
ads should not downplay the risks associated with trading in VDAs.
·
Details
of the advertiser should be clearly provided in the ads.
Due to the fact that VDAs are relatively new products
and are still evolving, and since the market for VDAs is currently unregulated,
the risk of trading in these products is high. Given that, these Guidelines are
a much-needed step in regulating information disseminated to potential consumers
regarding VDAs. It would advisable for companies dealing with, and advertising
VDAs to integrate these Guidelines into their advertising framework and
marketing strategies, while they wait and watch how the VDA regulatory
landscape evolves.
This update was prepared by Neela Badami (Partner, Samvad Partners), Vishnu Y. Kale (Senior Associate, Samvad Partners) and Sushma Sosha Philip (Associate, Samvad Partners).