Crypto, NFT companies must disclose risks upfront in advertisements from April 1

By Piyush Shukla

Marketplaces for virtual digital assets like cryptos and non-fungible tokens will now have to follow guidelines issued by the Advertising Standards Council of India (ASCI) while running ad campaigns. All ads will have to have disclaimers that tell consumers that these products are not regulated and highly risky. The guidelines will be applicable for ads published from April 1 and advertisers and media owners must ensure that all older ads run by these entities do not appear in the public domain till they comply with the new guidelines post April 15.

As per the guidelines, all ads for VDA products and VDA exchanges must carry the following disclaimer: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” This disclaimer must be presented in a prominent and unmissable manner, ASCI said.

In order to ensure that consumers are fully aware of the risks and are not misled by marketplaces, ASCI has come out with its new set of guidelines for virtual digital assets and linked services. These new rules require advertisements to be truthful such that consumers are not misled by implication, ambiguity, exaggeration or omission.The ads need to be framed in a transparent manner such that the their lack of knowledge is not exploited.

Further, the ASCI has sought VDAs to refrain from using words like ‘currency’, ‘securities’, ‘custodian’ and ‘depositories’ as consumers associates them with regulated products. Ads on past performance of the company’s product shall not be provided in any partial or biased manner and returns for less than one year period shall also not be included, ASCI said. Ads must mention the contact details of advertiser in a noticeable manner and all ads must ensure that no child is depicted as using or talking about any VDA.

“No advertisement shall contain statements that promise or guarantee future increase in profits. No advertisement may show that understanding VDA products is so easy that consumers do not have to think twice about investing. Nothing in the ad should downplay the risks associated with the category,” ASCI said, adding, that since this is a risky category, prominent personalities must conduct proper due-diligence before making any claims in the ad.

These guidelines come at a time when prominent cryptocurrency exchanges and companies are heavily publishing ads in the online, print and audio-visual mediums for brand awareness. While the Centre is yet to come up with a regulation on virtual digital assets, the Reserve Bank of India (RBI) has been proactively and repeatedly sounding caution over investments in such assets.

In a post monetary policy media interaction on February 10, RBI governor Shaktikanta Das said, “Private cryptocurrency is a big threat to macroeconomic stability and financial stability. Private cryptocurrencies or cryptocurrencies which have currency like character will undermine RBI’s ability to deal with issues of financial stability…they (investors) should also know that these cryptocurrencies do not have any underlying, not even tulip.”