SEBI proposes banning celebrity endorsement of cryptos

The Securities & Exchange Board of India (SEBI) has
suggested that no ‘prominent public figures, including celebrities and
sportsmen,’ should endorse crypto products. The market regulator proposed that
companies promoting cryptos and digital assets should also put up disclosures
listing possible law violations.

In April, SEBI clarified its position on the matter with
India’s Parliamentary Standing Committee on Finance when members asked
questions on various aspects of crypto. As a result, the market regulator
submitted a detailed written response to the Parliamentary Panel.

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The Advertising Standards Council of India (ASCI) issued
crypto advertising guidelines in February and the Ministry of Finance had urged
the SEBI to share its stance on such ads.

In response, the SEBI reportedly said, “Given that crypto
products are unregulated, prominent public figures including celebrities,
sportsmen, etc. or their voice shall not be used for endorsement/advertisement
of crypto products”.

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The market regulator also said that prominent public
figures should be held responsible for making such endorsements which is a
possible violation of the Consumer Protection Act or any other law.

According to the ASCI guidelines, all ads should carry a
disclaimer saying, “Crypto products and NFTs are unregulated and can be
highly risky. There may be no regulatory recourse for any loss from such
transactions”. Such a disclaimer should be made in the following manner so
that it is prominent and unmissable by an average consumer, said the
advertising watchdog.

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SEBI recommended that the given disclaimer by the ASCI
must include the possible law violations in crypto transactions. “Dealings
in crypto products may lead to prosecution for possible violation of Indian
laws such as FEMA, BUDS Act, PMLA, etc”.

Considering the volatile nature of cryptos and consumer
interest, SEBI’s proposal may not be completely unwarranted.

Over the past few weeks, the crypto market has seen a
sharp decline. There is unrest in the market because of TerraUSD’s Luna’s crash
from $116 on April 5 to $0 on May 13, a 100% decline in its value. Bitcoin, the
world’s biggest cryptocurrency, has slipped 35.75% YTD and currently trading
around Rs 22 lakh. It has lost more than half of its value since it reached an
all-time high of $69,000 in November last year.

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Crypto is yet to be regulated and has been declared
virtual digital assets (VDA) for taxation purposes only. Since VDAs are a risky
category, SEBI wants prominent personalities with a huge following to take
special precautions and proper research about the statement and claims made in
the advertisement to protect the consumers’ interest.