ASCI frames guidelines for advertising and promotion of Virtual Digital Assets and Linked Services

Virtual Digital Assets’ (VDA), as colloquially referred, constitute a new asset class which are technologically facilitated and premised on cryptography. They are effectively, digital representations of exchangeable value. As relatively new, unregulated, volatile assets, there is a need to safeguard investor interest and ensure that advertisements do not mislead or exploit consumers’ lack of expertise in such new asset class.

With this intention, the Advertising Standards Council of India (ASCI) has released ‘Guidelines for the advertising of Virtual Digital Assets and Linked Services’ on February 23, 2022 (Guidelines), after consulting industry stakeholders and the Central Government.

Guidelines

The Guidelines are applicable to all advertisements released or published across all mediums on or after April 1, 2022. Advertisements released or published earlier are also required to comply with the Guidelines to remain on air after April 15, 2022.

Following are the key guidelines:

• All advertisements for VDA products and/or exchanges, or advertisements featuring VDAs must prominently carry the disclaimer ‘Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.’ The Guidelines specify the various forms in which the declaration is to be made for different mediums, including print, static, video, audio and online media.
• The words ‘currency’, ‘securities’, ‘custodian and ‘depositories’ are not to be used in advertisements of VDA products or services.
• Information on past performance of the VDAs cannot be provided in any partial or biased manner, and returns for periods of less than 12 months cannot be included.
• The name and contact details of the advertiser are to be clearly given to enable easy contact.
• Minors are not to feature in VDA advertisements.
• Advertisements cannot:
  • Indicate that VDA products or trading therein solve financial problems
  • Make guarantees in relation to increase in future profits
  • Provide inaccurate or unclear cost or profitability information
  • Downplay the risks associated with VDAs
  • Compare VDA products to any other regulated asset class.

ASCI and the legal force of its guidelines

ASCI is a self-regulatory body that intends to govern content displayed on various advertisements. It has provided a Code for Self-Regulation of Advertising content in India (Advertising Code), applicable to advertisements made through various mediums. The Advertising Code, however, is provided legal sanctity under Rule 7(9) of the Cable Television Network Rules, 1994 (for the purposes of cable TV advertising).

As per the Press Release dated February 23, 2022, the Chairman of ASCI has clarified that the above Guidelines do not amount to any form of legal recognition or endorsements of VDAs, and that the same is solely a matter of government policy.

Redressal mechanism

One arm of the ASCI is the Consumer Complaints Council (CCC), which considers complaints (suo moto and other) received about any non-compliance of the Advertising Code or other guidelines issued by them from time to time. The CCC deliberates the complaints and provides its recommendations on whether the complaint is to be upheld or not. In case the complaint is upheld, the advertiser is given time to implement the CCC’s recommendations by withdrawing or modifying the advertisement to avoid violation of the Advertising Code. In case of continued non-compliance by the advertiser, ASCI will forward a copy of the recommendations to allied regulatory and government authorities for appropriate action. In exceptional circumstances, where there is a continued and serious breach of the ASCI Code, the ASCI may direct that the advertisement be suspended pending investigation.

ELP Comments/Key Takeaways:

• Increased responsibility – The Guidelines are applicable to advertisers of VDA, including cryptocurrencies and NFTs. While the Guidelines are focused on holding advertisers responsible, they also require celebrities and prominent personalities who appear in VDA advertisements to have carried out sufficient due diligence so as to not mislead customers.
• Various media covered – The guidelines provide specifications applicable to online media as well, including social media posts, disappearing stories and posts, and formats containing a limit on characters. This is another step in ASCI’s efforts to extend their regulations to the online space.
• Pre-publishing advice – ASCI provides an option to obtain ‘Advertising Advice’ by a panel of experienced members prior to the production or release of an advertisement. The same is kept confidential and is not binding on the advertiser or on CCC. This advice mechanism may be considered by advertisers to ensure that advertisements comply with ASCI guidelines and to mitigate any risk of subsequent complaints.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

Darshan Bora, Director – Email: darshanbora@elp-in.com
Sweta Rajan, Associate Partner – Email: swetarajan@elp-in.com
Samyuktha Srinivasan, Associate – Email: samyukthasrinivasan@elp-in.com

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.