Indian regulators are making the rulebook tough for celebrity endorsement of crypto products. The Securities and Exchange Board of India (SEBI) has advised prominent public personalities, including celebrities and sportsmen, to refrain from endorsing anything related to the digital asset industry.
SEBI’s stance is based on the logic that crypto products are not regulated in the Indian market, and some might violate existing laws, media reports said on Monday.
“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,” SEBI said in its recommendation, The Hindu Business Line quoted an unnamed source in its report.
Endorsements Could Violate Existing Laws
In a set of recommendations given to the Parliamentary Standing Committee on Finance, the securities and commodity markets regulator said the advertisement disclaimer prescribed by the Advertising Standards Council of India (ASCI) should also include possible violation of laws.
The SEBI report warned prominent public figures of being held responsible for making endorsements that prove to violate the Consumer Protection Act, Foreign Exchange Management Act (FEMA), Banning of Unregulated Deposit Schemes Act (BUDSA), and Prevention of Money Laundering Act (PMLA).
Under the Consumer Protection Act, 2019, wrong and misleading endorsements by celebrities can be penalized with a fine of up to Rs 10 ($12,840) lakh on the first instance and up to Rs 50 lakh ($64,210) on subsequent incidents, finally leading to a ban on any endorsement for three years.
More Elaborate Disclaimer
It suggested rephrasing the ASCI-prescribed disclaimer to add “dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc.” This is in addition to the disclaimer that crypto products are unregulated and can be highly risky as no legal recourse is available for fraud.
ASCI Guidelines were introduced in February this year, and taxation proposals in budget 2022-23 for the crypto sector used the term “virtual digital assets (VDA)” for such products. The Indian government has already explained that the reference to VDA is purely for taxation purposes, and it doesn’t mean the legalization or regulation of digital assets.
A Trail of Strict Policy for the Crypto Sector
The SEBI recommendation to make celebrity endorsement tough for crypto products is the latest in a series of strict policy decisions by Indian authorities.
Recently, sources claimed that tax authorities are planning to levy the highest 28% GST on crypto products, treating them as luxury items at par with gold, betting, lottery, and horse racing. This follows a steep 30% income tax on digital asset profits, effective April 1, 2022, without the provision to offset losses. This has hit the trading volume at the exchanges, and some are even considering fleeing the country.