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The Advertising Standards Council of India (ASCI) – the self-governing body of the advertising industry – recently issued “Guidelines for Advertising Virtual Digital Assets and Related Services”.
The guidelines – the first of their kind in India – came into effect on April 1, 2022, and are applicable to all new virtual digital asset listings published or published after this date. In addition, existing virtual digital asset ads – ads made before April 1, 2022 – must comply with the Guidelines by April 15, 2022.
Although ASCI is a self-governing body and these Guidelines are non-binding, several major players in the industry have voluntarily become members of ASCI, and thus these Guidelines have the potential to become the most widely accepted standards for advertising virtual digital assets in India.
A Virtual Digital Asset (VDA) is defined in the Guidelines as “any information or code, or number or token (not being Indian currency or foreign currency), generated by cryptographic means or otherwise, by whatever name, providing a digital representation of value exchanged is with or without consideration, with the promise or representation that it will have inherent value, or functions as a store of value or unit of account including its use in any financial transaction or investment, but not limited to an investment plan, and may be transferred, stored or which are traded electronically”.
The guidance further clarifies that VDAs also include what are commonly referred to as crypto products or non-fungible tokens (NFTs).
Until these Guidelines were issued, VDA advertisers relied heavily on ASCI’s “Code for Self-Regulation of Advertising Content in India” – as well as the Consumer Protection Act, 2019 to fill the regulatory gap in this area.
One of the reasons for formulating the Guidelines was the criticism the industry faced regarding the misleading nature of existing VDA advertisements. For example, an ad run by Bitbns – a crypto exchange – guaranteed a 4x increase in returns on its Bitcoin fixed deposit compared to returns on bank deposits, and an ad by CoinDCX – another leading crypto exchange in India – included terms like “easy” and “secure” while also containing a contradictory disclaimer to the effect that cryptocurrencies are unregulated and not legal tender in India.
Guidelines standards
Some of the important standards set out in the VDA Advertising Guidelines are:
- All advertisements for VDA, whether in print, video or audio format – including social media posts – would have to include a disclaimer that: “Crypto products and NFTs are unregulated and can be very risky. There may be no regulatory recourse for any loss from such transactions.” The guidelines state certain conditions regarding the posting of this disclaimer for each format. In addition to these provisions, disclaimers must meet the minimum requirements set forth in General ASCI Disclaimer Guidelinesie the disclaimer may be of a clarifying nature but should not contradict the claim made in the advertisement the disclaimer should not conceal material information which makes the advertisement misleading as to its commercial intent the disclaimer should not correct or qualify misleading claim made in the ad, and the disclaimer should adhere to certain placement and format requirements outlined in the disclaimer guidelines.
- The disclaimer must be in the dominant language of the advertisement, and words such as “currency”, “securities”, “custodian” and “depositors” must not be used when advertising VDA products or services.
- Advertisements should not contain information that conflicts with information or warnings that may be provided to customers on VDAs by regulated entities from time to time.
- Advertisements should provide accurate information regarding the cost/profitability of VDAs and their performance and should not contain any guarantees regarding future profits or give any indication that VDAs can be considered money, personality solutions or other problems.
- Returns of less than 12 months will not be relied upon to advertise past performance of VDA products.
- VDA ads should not feature minors trading or otherwise discussing such products, and celebrities involved in such ads should not make statements that mislead customers.
- Advertisements should not compare VDAs to any regulated asset class so as to create the impression that VDAs are regulated assets.
- VDA advertisements should not minimize the risks associated with trading VDA.
- Details about the advertiser should be clearly stated in the ads.
Due to the fact that VDAs are relatively new products and are still being developed – and because the VDA market is currently unregulated – the risk of trading these products is high.
With that in mind, these Guidelines are a much-needed step in regulating the information distributed to potential consumers regarding VDA. It would be advisable for companies dealing with and advertising VDA to integrate these Guidelines into their advertising framework and marketing strategies, while they wait and see 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).
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