India's Union Budget of 2022 mentioned the terminology "Virtual Digital Assets" (VDAs). VDAs are a superset for all computerized resources being executed on the blockchain, for example cryptos, non-fungible tokens (NFTs), or other virtual asset. Both cryptocurrencies and NFTs are on blockchain or other centralized/ decentralized structures.
The Union Budget did not attempt to define VDA, but seeks to tax any income from transfer of any VDA at 30% and tax deduction at source (TDS) at 1% for transfer of VDA to a resident. We will soon write about the tax aspects. But this post is on the advertisements that we hear regularly on FM94.3 and in main stream media.
ASCI has made a good attempt to define VDA. A Virtual Digital Asset (VDA) has been defined as any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme, and can be transferred, stored or traded electronically.
Advertising Standards Council of India (“ASCI”) noted that the advertisements related to VDAs do not adequately disclose the risks associated with such products. To protect purchaser interest and to provide transparency or knowledge on the risks, ASCI has framed the guidelines. ASCI has broadly talked with various stakeholders, including the government and the virtual digital asset industry, and framed the guidelines for advertising and promotion of virtual digital assets and services (“Guidelines”) on 23 February 2022. These Guidelines will be applicable to all VDAs ad released on or after 1 April 2022. Advertisers and media owners must also ensure that all earlier advertisements must not appear in the public domain unless they comply with the guidelines, post the 15 April 2022.
All advertising for VDAs and services needs to follow the following guidelines. ASCI has written the guidelines in very simple English. All ads for VDA products and VDA exchanges, or featuring VDAs, must carry the following disclaimer.
“Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions”.
Further, these disclaimers shall be made in the following manner so that it is ‘prominent’ and ‘unmissable’ by an average customer:
Ø In print or static, equal to at least 1/5th of the advertising space at the bottom of the advertisement in an easy-to-read font, against a plain background, and to the maximum font size afforded by the space.
Ø In video, the disclaimer should be placed at the end of the advertisement against a plain background. A voiceover must accompany the disclaimer in text. The voiceover should be at a normal speaking pace and must not be hurried. In the case of long format video of over two minutes, the said disclaimer should be repeated at the beginning and at the end of the video. The disclaimer must remain on screen for a minimum of five seconds.
Ø In audio, the disclaimer must be spoken at the end of the advertisement. The voiceover should be at a normal speaking pace and must not be hurried. In the case of long format audio of over 90 seconds, the said disclaimer should be repeated at the beginning and at the end of the audio.
Ø In social media posts, such a disclaimer must be carried in both- the caption as well as any picture or video attachments. The disclaimer within the caption must be placed upfront at the beginning of the post. Where social media posts. Or advertisements have restrictions on text in the static picture, the disclaimer must be carried upfront in the caption before the fold.
Ø In disappearing stories or posts unaccompanied by text, the said disclaimer will need to be voiced at the end of the story in the manner laid out in points (a) or (b) above. If the video is 15 seconds or lesser, then the disclaimer may be carried in a prominent and visible manner as an overlay.
Ø In formats where there is a limit on characters, the following shortened disclaimer must be used “Crypto products and NFTs are unregulated and risky” followed by a link to the full disclaimer.
Ø The disclaimer must be made in the dominant language of the advertisement.
Ø In addition to the above, all disclaimers must meet the minimum requirements laid down in the ASCI guidelines for disclaimers.
Further, the words like “currency”, “securities”, “custodian” and “depositories” may not be used in advertisements of VDAs products or services as consumers associate these terms with regulated products.
The information mentioned in the VDAs advertisements shall not contradict the information or warning that the regulated entities provide to its customers from time to time. Information on past performance shall not be provided in any partial or biased manner. Returns for periods of less than 12 months shall not be included. Every advertisement for VDA products must clearly give out the name of the advertiser and provide an easy way to contact them (phone number or email). This information should be presented in a manner that is easily understood by the average consumer. The advertisements for VDAs shall not show a minor or someone who appears to be a minor. Additionally, the advertisements for VDAs shall not show that VDA trading or exchange could be the solution to money problems.
The advertisements for VDAs shall not show statements that promise or guarantee future increase in profits and the advertisements show that VDA products is so easy that consumers do not have to think twice about investing. VDA products may not be compared to any other asset class which is regulated.
Most importantly, the celebrities or prominent personalities who appear in VDA advertisements must take special care to ensure that they have done their due diligence about the statements and claims made in the advertisement, so as not to mislead consumers.
The framing of Guidelines is a good initiative by ASCI, as to establish a standard for VDA advertisements with the aim of safeguarding the customers and to make them aware of the risks involved in the market and to ensure that the advertisers and owners do not misrepresent, or mislead the customers.