Cryptocurrency ads: India has no legal way to regulate it

Cryptocurrency is not regulated in India. Already a high-risk product, this makes it even more volatile. Still, consumers are flooded with full-page ads and shiny campaigns featuring their favorite stars, urging them to invest. We can see that there is Tanmay Bhatt on YouTube, Nikhil Chinapa on Instagram, and Kunaal Roy Kapur on the TV set. Last week’s India-Pakistan cricket match was telecast alongside a plethora of ads for cryptocurrency.

According to broker discovery and comparison platform BrokerChooser, India has the highest number of crypto owners in the world which is 10.07 crore. The US comes in second, with 2.74 crores, followed by Russia at 1.74 crores and Nigeria at 1.30 crore. In 2018, the RBI had banned banks and other regulated financial entities from dealing with clients who handle private cryptocurrencies such as Bitcoin. In March this year, the Supreme Court stepped in and overturned the order. It is said that under the existing law, the RBI does not have the power to restrict individual dealings in cryptocurrencies.

There is a rumor that the Indian government might bring in a law to regulate cryptocurrency in the 2022 budget. Meanwhile, the ads run free, accompanied by fine-print disclaimers about market risk. Disclaimers provided by advertisements are often tiny, quick, and missable.

Anirban Bhattacharyya is a partner at Shardul Amarchand Mangaldas. He said that in the absence of formal regularisation, cryptocurrencies are essential assets.

“From an Indian regularisation perspective, it is as good as buying or selling any goods online,” he said. “But these are assets that have a certain value that’s going up and down and there is trading happening. For all practical purposes, these are securities, except there are nobodies like SEBI or RBI treating them as such. You’re attracting investors with the promise of an asset that is suddenly seeing an uptick in a short period of time. Cryptocurrencies have suddenly seen a huge surge of retail investment and that is mostly goaded by advertisements, celebrity endorsements, and the huge uptick in returns,” he said. “This automatically becomes something which is leading retail investors to believe it is a means to make a quick buck, without being aware of the risk factors involved.” He added that the level of disclosures given for cryptocurrencies and their ads is non-transparent. This substantially increases the risk factor for retail investors looking to make a quick buck.

Section 89 of the Consumer Protection Act 2019 states that a manufacturer or service provider involved in a “false or misleading advertisement” that is “prejudicial to the interests of consumers” faces imprisonment up to two years and a fine up to Rs 10 lakh. This applies to all ads, cryptocurrency included.

In July 2021, the Delhi High Court issued notice to the center, SEBI, and cryptocurrency exchanges in a plea. This plea sought guidelines to regulate the advertisement of cryptocurrency asset exchanges in India. The petitioners sought guidelines mandating that the disclaimer text cover 80 percent of the screen, with a slow voice-over lasting five seconds. Most ads do come with disclaimers, but they’re easy to miss, appearing at the bottom of the ad or for a few seconds at the end of it. At the end of the ad for CoinSwitch Kuber, for instance, in text smaller than “download the app now”, are the following lines: “Cryptocurrency is an unregulated digital asset, not a legal tender and subject to market risks. All investments are subjected to price fluctuation risk. CoinSwitch Kuber does not guarantee any assured returns or profit.”