ETtechMUMBAI: Concerns about aggressive advertising by crypto exchanges amid regulatory uncertainty, which up until now were murmurs in investor and financial circles on social media, have finally made it to the Delhi High Court.
Earlier this month, two advocates filed a public interest litigation against WazirX, Coinswitch Kuber, and CoinDCX, asking the markets regulator to issue guidelines and take steps against crypto exchanges advertising on television without standardised disclaimers.
Apart from the exchanges, the Securities and Exchange Board of India (Sebi) and the Ministry of Information and Broadcasting are named as respondents in the case. The court issued notices and gave them until August 31, the date of the next hearing, to respond.
“Without standardised disclaimers, normal retail investor class is put at risk of their interests not being protected by [Sebi],” the petition reads. It adds that despite crypto being a far riskier asset than stocks or mutual funds, exchanges do not follow standardised guidelines for TV ads.
Together, the three exchanges have close to 15 million users, most of whom are young and have begun investing in the past six months.
In recent months, crypto exchanges have doubled down on advertising on social media, streaming platforms and TV. Flush with funds, they have hired celebrities and influencers, advertised during the Indian Premier League, and urged investors to buy tiny fractions of bitcoin for as little as Rs 100. In some cases, the petition said, exchanges have promised astronomical returns.
According to one marketing executive, top exchanges were spending up to Rs 15 lakh a week on digital platforms alone at the peak of the cryptocurrency rally in March.
However, these ads often lack spoken disclaimers, and written disclaimers about the asset’s volatility are barely noticeable. In a social media post for CoinDCX's Bitcoinliyakya campaign actor Nora Fatehi said, “Investing in bitcoin and cryptocurrencies is completely legal and safe.” Two lawyers we spoke to said crypto falls in a legal grey area in India.
Also Read: Indians over 45 are exploring the wild west of cryptocurrency
The self-regulatory code enforced by exchanges that is currently in place includes voluntary compliance with anti money laundering, combating financing of terrorism, and know your customer rules. However, it does not include any guidelines on advertising.
An exchange executive, who did not wish to be named, said that any sort of consensus on regulations would be good for the industry, adding that it remains to be seen how the business of crypto exchanges will be classified. “Is it a financial service? The definition is an issue. It’s not a defined thing,” he said, adding that crypto exchanges do issue disclaimers with their TV ads.
The record bull run crypto prices, which stretches back to the start of the pandemic last year, made a lot of people wealthy. But the subsequent crash cost many their entire savings. Business graduate Pratik Gupta, who invested his savings in meme coins such as Dogecoin, told ET his losses currently run into lakhs.
He said, “In terms of crypto, I don't see any investor protection anywhere in the world. The basic way of protecting stock market investors around the world is using circuit breakers, which are non-existent in the world of crypto. This is still a grey area in India and watching TV ads by crypto exchanges feels weird.”
A senior lawyer in the financial sector, who has worked closely with Sebi, said, “[Mutual funds] are the most regulated financial product in the world, [crypto] is the least. Crypto is a free-for-all -- you can be truthful or dishonest.”
He added that if someone defrauds a crypto investor the only recourse is a civil suit, unlike mutual funds and stock markets, for which an investor can approach Sebi.
When I see those Bitcoin ads with the woman dancing etc, I find it to be so unfair! Mutual funds marketing has such… https://t.co/foHV7TFDqu
— Sanjay Mehta (@sm63) 1624106206000Earlier this month, two advocates filed a public interest litigation against WazirX, Coinswitch Kuber, and CoinDCX, asking the markets regulator to issue guidelines and take steps against crypto exchanges advertising on television without standardised disclaimers.
Apart from the exchanges, the Securities and Exchange Board of India (Sebi) and the Ministry of Information and Broadcasting are named as respondents in the case. The court issued notices and gave them until August 31, the date of the next hearing, to respond.
“Without standardised disclaimers, normal retail investor class is put at risk of their interests not being protected by [Sebi],” the petition reads. It adds that despite crypto being a far riskier asset than stocks or mutual funds, exchanges do not follow standardised guidelines for TV ads.
If #bitcoin advertising can happen like this why not MF? @mohanty_swarup
— Sanjay Tripathy (@Sanjay_Tripathy) 1624112071000Together, the three exchanges have close to 15 million users, most of whom are young and have begun investing in the past six months.
In recent months, crypto exchanges have doubled down on advertising on social media, streaming platforms and TV. Flush with funds, they have hired celebrities and influencers, advertised during the Indian Premier League, and urged investors to buy tiny fractions of bitcoin for as little as Rs 100. In some cases, the petition said, exchanges have promised astronomical returns.
According to one marketing executive, top exchanges were spending up to Rs 15 lakh a week on digital platforms alone at the peak of the cryptocurrency rally in March.
However, these ads often lack spoken disclaimers, and written disclaimers about the asset’s volatility are barely noticeable. In a social media post for CoinDCX's Bitcoinliyakya campaign actor Nora Fatehi said, “Investing in bitcoin and cryptocurrencies is completely legal and safe.” Two lawyers we spoke to said crypto falls in a legal grey area in India.
Also Read: Indians over 45 are exploring the wild west of cryptocurrency
The self-regulatory code enforced by exchanges that is currently in place includes voluntary compliance with anti money laundering, combating financing of terrorism, and know your customer rules. However, it does not include any guidelines on advertising.
An exchange executive, who did not wish to be named, said that any sort of consensus on regulations would be good for the industry, adding that it remains to be seen how the business of crypto exchanges will be classified. “Is it a financial service? The definition is an issue. It’s not a defined thing,” he said, adding that crypto exchanges do issue disclaimers with their TV ads.
The record bull run crypto prices, which stretches back to the start of the pandemic last year, made a lot of people wealthy. But the subsequent crash cost many their entire savings. Business graduate Pratik Gupta, who invested his savings in meme coins such as Dogecoin, told ET his losses currently run into lakhs.
He said, “In terms of crypto, I don't see any investor protection anywhere in the world. The basic way of protecting stock market investors around the world is using circuit breakers, which are non-existent in the world of crypto. This is still a grey area in India and watching TV ads by crypto exchanges feels weird.”
A senior lawyer in the financial sector, who has worked closely with Sebi, said, “[Mutual funds] are the most regulated financial product in the world, [crypto] is the least. Crypto is a free-for-all -- you can be truthful or dishonest.”
He added that if someone defrauds a crypto investor the only recourse is a civil suit, unlike mutual funds and stock markets, for which an investor can approach Sebi.