crypto: Why Sebi has banned celebrity endorsements of crypto investments

The Securities and Exchange Board of India (Sebi) has suggested that no “prominent public figure, including celebrities and sportsmen” should endorse cryptocurrencies after several investors first fell in love with the dazzling cryptocurrency ads of popular actors and celebrities. of Bollywood last year. Sebi also wants the disclosure of the ad to also talk about possible violations of the laws.
Currently, cryptography is unregulated and has been designated as a virtual digital asset (VDA) for tax purposes only.
In a detailed response to questions from members of the parliamentary panel, Sebi said: “Since cryptographic products are not regulated, approval or any announced message, verbal statement, demonstration or representation of the name, signature, likeness or other personally identifiable an individual or representation of the name or seal of any institution or organization which makes the consumer believe that it reflects the opinion, discovery or experience of the person making such endorsement. ”
Sebi also said that if cryptographic assets are not banned, then function-based characterization of the tokenized version of assets is needed, which may attract oversight from different industry regulators.
In February, the Advertising Standards Council of India (ASCI) published cryptographic advertising guidelines in February and the Ministry of Finance urged Sebi to share its position on these announcements.
In response, Sebi said prominent public figures should be held accountable for making such endorsements, which is a possible violation of the Consumer Protection Act or any other law.
According to ASCI guidelines, all advertisements must carry a disclaimer that states, “Cryptographic products and NFTs are unregulated and can be very risky. There may be no regulatory recourse for losses arising from such transactions.” Such disclaimer should be done as follows so that it is prominent and unmissable for an average consumer, the advertising control body said.
SEBI suggested that the disclaimer given by ASCI should add possible violations of the law in cryptographic transactions. “Treatments with cryptographic products can lead to prosecution for a possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc.”
“Cryptographic assets are not currently regulated and SEBI only refers to them as Virtual Digital Assets for Tax Reasons (VDAs). The government is concerned about the welfare of citizens who may be defrauded due to a lack of awareness about cryptographic programs.As a result, we have reached a point where we need to reconsider our marketing strategy to promote awareness among enthusiasts. “Celebrities are one of the easiest ways to distribute information. Ads should now be designed to highlight issues while emphasizing the importance of investor judgment,” said Vijay Pravin Maharajan, founder and CEO of bitsCrunch.
In the last two weeks, the dramatic crash of Terra (Luna), ranked among the 10 most valuable cryptocurrencies, has wreaked havoc on the lives of investors who fear they will be left homeless after cryptocurrency chaos. In just 24 hours, its market capitalization has dropped from more than $ 40 billion to just $ 500 million, up more than 99 percent. The Terra Luna crash began when the cryptocurrency-based Stargecoins TerraUSD, which are linked to the dollar, began to plummet. The fall of TerraUSD could lead to a large-scale sale of Terra Luna, which eventually led to falling prices.
“There are several factors, some specific to cryptocurrencies and others exogenous, that have contributed to the new decline. Investors in general are moving away from risky assets such as cryptocurrencies as U.S. policymakers tighten the money supply. That has also driven equity. “There are also specific cryptographic issues that are contributing to the continuing decline, such as the UST losing its $ 1 value and Luna’s debacle. Many argue that Luna was simply a disaster that was expected to happen.” said Akshaya Bhargava. Founder and CEO of Bridgeweave, a UK-based fintech company.
“Bitcoin, Ethereum and other altcoins have moved in conjunction with the stock market. Wall Street bearish sentiment has also fallen in the crypto markets. Just a day after US Federal Reserve Chairman Jerome Powell commented as the starting point “As rate hikes continue to control inflation, markets have reacted by adopting a risk-taking approach. A rapid recovery in the cryptocurrency market is unlikely if macroeconomic conditions do not improve,” said Darshan Bathija, CEO and co-founder of Vauld, a stock exchange. cryptocurrencies. company, based in Singapore.
Where is the due diligence?
“Many innocent retail investors, being influenced by the backing of celebrities, bet all their savings on cryptocurrencies and end up losing them all. Celeb’s backing in no way helps to analyze the risk-return ratio, technology and all these exchanges. “Uncontrolled practice will continue. Instead of celebrities, Instagram and TikTok stars will support. However, the government’s intention is to protect its citizens,” said Abhinav Garg, founder of Blocktickets, the first platform for buying NFT tickets from all over the world for all interested parties.
“Given the influence celebrities have on consumers, it’s important for consumers to be aware of the risks involved in these products. The ASCI guidelines state how ads should be published in a variety of media. and investor protection, SEBI, in its responses to the Standing Committee on Parliament, proposed that there should be a ban on celebrities endorsing cryptographic products, as cryptographic products are not regulated, “said Chandrima Mitra, a partner at DSK Legal.

What does the law say?

At first it may be said that the legality of cryptocurrency is a bit gray considering that there is no law regulating or denying its legality.
“In that situation, celebrities or public figures like this should do their due diligence before announcing cryptocurrencies. It is already in use, and the government recognizes that it is in use, due to its status being a limitation of its rights, perhaps working on a framework or guidelines to keep those ads under control and to ensure that due diligence is done “said Kritika Seth, founding partner of Victoriam Legalis – Advocates & Solicitors
Is a ban really necessary?
“Freedom to trade or trade, including advertising (except illegal) is an integral part of Article 19 of the Constitution. In addition, everyone has the right to know and obtain information. ‘Caveat Emptor’ is the main principle of consumer law and It is generally applied to stock markets that are exposed to frequent risks.In general, investors entering the cryptocurrency market are expected to have basic knowledge and research.The mere endorsement of celebrities does not attract people to such a risky market. Disclaimer policies and the terms and conditions are helpful.
Therefore, it is not necessary to ban celebrity endorsement of cryptocurrency. Non-regulation of the market cannot be a solid reason as legislative gaps cannot be weighed against fundamental rights, ”said Anushkaa Arora, director and founder of the ABA Law Office.
Previous examples of celebrity recommendations
In October 2021, CoinDCX, a cryptocurrency exchange, entered Ayushmann Khurrana to appear in its advertising campaigns and to address major concerns related to cryptocurrency investments and cryptocurrency myths. CoinSwitch Kuber, a cryptocurrency exchange, signed Ranveer Singh as the brand’s ambassador the same month to attract Generation Z and millennial investors, while Salman Khan also introduced $ GARI in October 2021, a crypto-token launched by the video app Chingari microcontent short, along with announcing its collaboration with the app as a brand ambassador for its NFT marketplace and its token rewards program on Twitter.
Point to note: Since the ASCI guidelines came into force in April 2022, ASCI has detected violations in four cryptographic advertisements and 25 advertisements related to influencers in cryptographic products.

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