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SEBI suggestion against endorsing crypto: Will celebs listen?

India is a hotbed for the cryptocurrency industry and investment in the sector crossed $6.6 billion in May 2021

e4m by Kanchan Srivastava
Published: May 18, 2022 8:18 AM  | 7 min read
crypto

From actors Ranveer Singh and Ayushmann Khurrana to cricketer Dinesh Kartik, crypto platforms have been roping in India’s top celebrities to advertise crypto trading in the country with a population of more than 1.3 billion. 

No surprises that India has got close to 20 million crypto investors within a short span of time. Many investors incurred huge losses recently as the much hyped crypto market crashed.

Now, the Securities and Exchange Board of India (SEBI) has proposed to stop celebrities and sports persons from promoting cryptocurrencies. The SEBI also suggests rewording of disclaimer provided 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,” after stating the risk and mentioning that no legal recourse is available for fraud.

Incidentally, there is no law to regulate the crypto trade in India as of now. The government designated the category early this year as virtual digital assets (VDA) for taxation purposes only.

This is despite the fact that India is a hotbed for the cryptocurrency industry and investment in the sector crossed $6.6 billion in May 2021. 

Currently, India ranks 2 out of 154 nations in terms of cryptocurrency adoption, as per blockchain data firm Chainalysis report released in October 2021. A year ago, India was at 11th position. 

People, especially the ad and media industry members, wonder whether SEBI’s suggestions will have any impact on celebrity endorsements or will the celebs stop endorsing cryptos altogether considering the fluid situation. 

Sandeep Goyal, Ad Expert and MD of Rediffusion, says, “Crypto in India is work-in-progress. The category is in a very fluid state. Celebrities in India are known not to exercise much judgment or discretion in their endorsement choices. Hence the SEBI ban is a good caution - putting guard rails in place.”

Some of the celebrities who have promoted cryptocurrencies on Instagram, YouTube, and Twitter include standup comics Tanmay Bhat, actors Radhika Apte, Kunaal Roy Kapur, and Manoj Bajpayee, YouTube sensation Ashish Chanchlani, content creators Kusha Kapila and Dolly Singh, vlogger Vishnu Kaushal. 

Most promotional videos don’t disclose the risks associated with investing in cryptocurrencies. In addition, many of these celebrities have young followers, which makes these ads even riskier, industry experts say. 

Deepak Kapoor, Founder of BEGIN India think tank which has been raising the issue of irresponsible advertising by crypto exchanges for long, hails the SEBI move.

“It would be opportune to recall that this entire issue came to the forefront when PM Narendra Modi spoke against irresponsible advertising and scamming of gullible youth and investors by Crypto Exchanges. It was an endorsement of our long standing campaign of 2 years.”

Kapoor further said, “Disclaimers have been struck down by courts in favor of consumers, and against Advertisers (& their endorsing celebrities) multiple times, especially against Real Estate Developers. A disclaimer is by no means immunity against prosecution by the law, if it violates any existing laws. Otherwise, if all this is within the law and no false claims have been made, I think no disclaimer is even necessary. Yet, in the context of Crypto, where the RBI Governor has clearly said that it undermines Indian Sovereign Currency, celebrities would do best to stay away till a Crypto Bill is passed & there is clarity.”

KS Chakravarthy (Chax), VP - Creative Services, Zenoti, says, “The essential problem in India is that politicians make laws. And the money flows through the holes so those are wide and gaping. And some poor bureaucrat makes impotent little suggestions that people have no trouble whatsoever ignoring. So ban crypto, or shut up is all one can say.”

“Pathetic disclaimers in a dozen ads only confuse the viewers, and do little else. And suggestions are just that - toothless by their own admission,” Chax added. 

SEBI having a point of view on products public personalities can or cannot endorse is quite ridiculous, says Lloyd Mathias, Business Strategist and Independent Director.

“It is ok for SEBI to issue mandates about financial products like crypto currencies, but recommending that celebrities should not endorse them, is clearly beyond its mandate – and seems like a case of overreach,” Mathias says. 

Mathias adds that the government may choose to tax any income – as long as the category is not illegal or banned.  Clearly, cryptos are not in either category for now.

“In the unlikely event of this being done, it raises some important questions:  Who determines who is a public figure and who is not?  Also, this impedes any public personality's fundamental right to earn, by endorsing a product – so there are bound to be issues, which celebrities can question,” he points out.  

Avinash Shekhar, CEO, ZebPay says, “SEBI's recommendation seems to be directed at protecting investors by preventing impulsive, influencer-driven adoption. While there may be merit in this, nothing can protect investor interests better than progressive regulation.”

Shekar feels that it is likely that many celebs will follow SEBI's directive, however it's hard to say if all will, at this point.

According to Charles Tan, Chief Marketing Officer at Atato, a licensed MPC crypto custodian wallet, "Crypto and blockchain are a global phenomenon and isolated regulatory guidelines will not only hurt the growth prospects of the industry but will discourage global collaborations and stunt the growth for the development of crypto and blockchain. KOLs and influencers play a lead role in promoting brands and their related services. As with all products or services, celebrities and public figures would have to do their due diligence and promote services they are comfortable with. I strongly believe that there should be an open channel dialogue with all the relevant stakeholders of the industry to reach a consensus." 

Celebs should circumspect: ASCI 

When asked about SEBI’s suggestions and its reflection on ASCI’s own guidelines, Manisha Kapoor, CEO of ASCI told e4m, “ASCI has a specific guideline on celebrities. Plus, there are the crypto guidelines as well. Given that crypto products are unregulated, prominent public figures, including celebrities, sportsmen, etc, should be circumspect while endorsing/advertising crypto products.”

Kapoor says that ASCI has always maintained that celebrities need to do their due diligence on the claims they endorse. 

“The Consumer Protection Act too lays down penalties for endorsers in case the ad they feature in is found misleading, and if they have done no due diligence. Since this is a risky category (virtual digital assets), 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. Endorsers may not have domain expertise but they must take the effort to do due diligence as part of their responsibilities,” Kapoor explains. 

Crypto Scene

There are more than 14,000 crypto coins in existence including the Sandbox, Decentraland, Avalanche and Wax that have been among top performers in the trading markets. 

Crypto ads flooded TV and social media during the last IPL season and T20 World Cup cricket tournaments.

Crypto exchanges pumped close to Rs 200 crores into their digital and television campaigns and in high decibel properties until the government of India put a break by proposing a new Law to regulate the crypto firms and ASCI released a set of guidelines for the domain in February this year that came into effect on April 1.

After much criticism, the crypto brands decided to stay away from the IPL 2022 season which is ongoing. 

Penalty for misleading ads

The Consumer Protection Act, 2019, puts the onus of due-diligence on the celebrities for claims made in the ads. 

The Central Consumer Protection Authority (CCPA) can also levy a penalty of up to ₹10 lakh on the celebrity endorser for a false or misleading ad in the first instance and penalties can go up for ₹50 lakh for any further instances of false and misleading claims in ads. It can also prohibit celebrities from endorsing any other products for up to three years. 

However, no big celebrity has ever been fined or banned by CCPA. 

Prolonged Confusion 

Private digital currencies have gained popularity in the past decade or so. However, Indian regulators and governments have not been able to come up with a law that can put things in black and white. 

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