New ASCI guidelines for crypto, NFTs: What does it mean for investors, advertisers?

Crypto exchanges, while largely welcoming of the new guidelines, stress on regulators and other stakeholders understanding the nuances of the virtual digital assets space

By Naini Thaker Forbes India Staff

Published: Feb 28, 2022 04:18:25 PM IST

Updated: Feb 28, 2022 05:55:57 PM IST

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Finfluencers like Neha Nagar insist on the ‘do your own research’ approach, the ASCI guidelines will further encourage investors to research and understand the risks associated with the crypto and NFT market

On February 23, the Advertising Standards Council of India (ASCI) announced a set of guidelines for advertising and promotion of virtual digital assets (VDA) and services. So far, a lot of these advertisements do not adequately disclose the risks associated with such products. These guidelines, according to ASCI, are to safeguard consumer interest, and to ensure that ads do not mislead or exploit consumers’ lack of expertise on these products.

“We studied the nature of ads the industry was putting out and the potential for consumers to be misled by certain kinds of claims and promises. In addition, we did extensive discussions with different stakeholder groups and experts, as well as looked at global guidelines,” says Manisha Kapoor, secretary-general, ASCI.

These guidelines will be applicable to all advertisements released or published on or after April 1. Be it a print, video, audio or social media, all advertising for VDA products and services should include a 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 is expected to be both unmissable and prominent.

“Unfortunately, several platforms in India have positioned it [VDAs] as a speculative investment instrument, and directly or indirectly pushed the public opinion that you can get 10x, 100x and 1000x returns by investing in this,” says Praphul Chandra, founder and chief scientist, KoineArt ngageN.

Financial influencer [or finfluencer], Neha Nagar’s audience includes a majority of teenagers who are very interested in cryptocurrency, and invest their pocket money there. She says, “They [teenagers] tend to trust some influencers very easily as they want to get rich quick. Therefore, they invest in the tokens suggested by their so-called ‘gurus’ without doing their own research.”

Although finfluencers like Nagar insist on the ‘do your own research’ approach, the ASCI guidelines will further encourage investors to research and understand the risks associated with the crypto and NFT market. “There are a lot of scams happening, where some influencers and celebrities are paid a lot of money to promote coins that have no use-cases and are likely to cause investors to lose their money,” says Nagar.

Another important ASCI guideline is that the words “currency”, “securities”, “custodian” and “depositories” may not be used in advertisements. “Customers and investors associate these terms with regulated products,” says Kapoor, “and as VDAs are not regulated as of now, it is important... as use of the use of these terms could confuse consumers.”

Nagar feels that this guideline was not necessary. “Personally, I think this was unnecessary as currency can be any medium of exchange, be it regulated or unregulated. This may pose problems for content creators like me—as we need to be quite careful while explaining stuff—and affect our creative freedom.”

Other guidelines say that minors should not be part of the advertisements, risks associated with this category cannot be downplayed, information must be presented in a manner that is easily understandable by consumers, and no comparisons must be drawn of VDA products to other regulated asset classes.

“We looked at the guidelines for financial products as well the discussions and debates around crypto regulation globally, including those in Europe and other Asian markets,” Kapoor says. Experts believe that these guidelines will help protect the small investors, particularly, who were being taken for a ride.

Harish Bijoor, business and brand-strategy expert and founder, Harish Bijoor Consults, says, “These are especially needed till cryptocurrencies and NFTs mature and get statutory regulators to govern. Till then, only voluntary and non-statutory bodies such as ASCI become gate-keepers.”

But do these guidelines restrict creative freedom? He feels not. “Sure, 20 percent of the space for any medium might get occupied by these declarations, but the rest is out there to use. The category can still stay creative.” This has been the case for several other regulated products such as mutual funds, insurance and other financial products and services, which come with disclaimers.

Crypto exchanges have also welcomed the guidelines. “The VDA industry is supportive of all efforts towards investor protection, however, there are nuances that need to be addressed as the space is ever-evolving. We will continue to work together with ASCI and other stakeholders to refine them further,” says Ashish Singhal, founder and CEO, CoinSwitch.

Chandra of KoineArth says that the crypto space is not understood by many and the regulators have always looked at it as a purely speculative instrument withiout realising the beneficial real-world use-cases. “But now, because of the misdeeds of a few platforms, the rest of the industry will pay the price,” he says. Chandra urges the ASCI to look at a different set of guidelines for cryptocurrencies and for NFTs, since both need to be tackled differently. Even within NFTs, there is a need to differentiate between NFTs depending on whether or not they are accompanied with a physical asset. He says, “Hopefully, with time, we can find a middle ground.”