In a recent statement, SEBI bans celebrity crypto promotions. The SEBI (Security Exchange Board of India) has declared that ‘prominent public figures, including celebrities, sportsmen’ should not be seen endorsing any crypto product and the advertisement disclosure should talk about the effective violation of laws. With that let us have a look at some of the cryptocurrency news in India.
To date, there is no regulation around crypto and it has been named as VDA (Virtual Digital Asset) for the purpose of taxation only looking at the various news about cryptocurrency. SEBI brought forward its view to the Parliamentary Standing Committee on Finance when the officials were quizzed by the members on several dimensions of the crypto space the previous month. Presently, the regulators have submitted a detailed reply in writing. The Finance Ministry of India has also asked the regulators to offer their views on advertisements and also forwarded guidelines by ASCI (Advertising Standards Council of India).
SEBI Bans Celebrity Crypto Promotions
Because of the unregulated scenario of cryptos, SEBI has levied a ban on the celebrity promotion or endorsement of crypto items in any advertisements. SEBI stated to the parliamentary panel that in case of any cryptocurrency endorsements by a significant public figure will fall under the discretion of the Consumer Protection Act. On being asked why SEBI bans celebrity crypto promotions,
“Since crypto products are unregulated, endorsement or any advertised message, verbal statement, demonstration or depiction of the name, signature, likeness, or other identifiable personal characteristics of an individual or depiction of the name or seal of any institution or organization which makes the consumer believe that it reflects the opinion, finding or experience of the person making such endorsement.”
Along with that, SEBI further added that crypto-assets do not uphold the characteristics of securities under Securities Contracts (Regulation), Act, 1956 or SCRA and neither does the Central Government match to it. The board further clarified that,
“Tokenization of assets and running it on a decentralized platform is still linked to the underlying asset it represents. The extant laws applicable to the underlying asset may be applicable to the tokenized asset too. Under these circumstances, it is not clear whether/which crypto assets/ cryptocurrencies can be legally defined as securities.”
SEBI Bans Celebrity Crypto Promotions: Rewording Disclaimer
A source added in response to the disclaimer that,
“Given that crypto product is unregulated, prominent public figures including celebrities, sportsmen, etc. or their voice shall not be used for endorsement/advertisement of crypto products.”
Further, it stated that the significant public figure shall be held liable for doing endorsement which is an evident violation of the Consumer Protection Act or any similar law. The source also stated that the Security Exchange Board of India recommended rewording of disclaimer offered by ASCI by adding,
“Dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc.”
This statement was made after talking about risk and no legal resources available for fraud.
According to Lloyd Mathias, Business Strategist and Independent Director,
“A complete ban on advertising a specific category is one thing. But if there is no ban on advertising the product, then determining who can endorse that product or not is just not debatable.”
He further added that this can also impede the fundamental rights of any public personality to earn.
Last November, in the middle of a crowd of cryptocurrency advertisements that featured celebrities, a meeting was chaired by the Prime Minister Narendra Modi and it was strongly felt that attempts to mislead the youths via non transparent and over promising ads be stopped. And in this respect, SEBI bans celebrity crypto promotions.
After that, the Advertising Standards Council of India consulted with various stakeholders, that include the government and also the VDA sector to frame guidelines for advertising and connected services. These were launched in February and came into impact on April 1. The guidelines stated,
“Since this is a risky category (VDAs), 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.”
SEBI Bans Celebrity Crypto Promotions And Levis Penalty
The Consumer Protection Act, 2019, also steadily puts the burden of due diligence on the celebrities for assertions in all advertisements. If an advertisement is found to be misleading or false, the Central Consumer Protection Authority can release directions to modify or discontinue the advertisements to the concerned manufacturer or celebrity endorsers of the item.
SEBI bans celebrity crypto promotions and the CCPA can also force a penalty of up to ₹10 lakh on the celebrity endorser for a misleading or false advertisement in the first instance and penalties can rise to ₹50 lakh for any further scenarios of false and misleading assertions in advertisements.
It can also stop celebrities from endorsing any other items for up to three years. However, it further adds,
“No endorser shall be liable to a penalty 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 Consumer Affairs Ministry is also anticipated to finalize soon the guidelines for stopping misleading ads under the Consumer Protection Act.
The SEBI bans celebrity crypto promotions and the board has reportedly recommended that the significant public figures like celebrities and sports people should stay away from endorsing. It further added the various scenarios where celebrities may have to pay penalties for breaking the law.