Earlier this month, two advocates filed a Public Interest Litigation against crypto exchanges WazirX, Coinswitch Kuber and CoinDCX, seeking the court’s intervention to direct India’s capital markets regulator to issue guidelines and take steps against advertisements on TV that run without standard disclaimers.
Crypto exchanges, the Securities and Exchange Board of India (Sebi) and the Ministry of Information and Broadcasting have been named as respondents in the case.
The court has given them time till August 31, the date of the next hearing, to respond.
“Without standardised disclaimers, the normal retail investor class is put at risk of their interests not being protected by [Sebi],” according to the petition.
Despite crypto being a riskier asset class than stocks or mutual funds, it said crypto exchanges do not follow standardised guidelines for TV ads.
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) 1624106206000
Coinswitch Kuber and CoinDCX said in a statement that they run disclaimers with their advertisements.
WazirX was not immediately available for a comment.
The three exchanges have a combined 15 million users, mostly young and new to crypto.
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, have advertised during the Indian Premier League, and urged investors to buy tiny fractions of leading cryptocurrency Bitcoin for as little as Rs 100. In some cases, the petition said, exchanges have promised astronomical returns.
According to one marketing executive, top crypto exchanges spent up to Rs 15 lakh a week on digital platforms alone in May.
These ads often lack spoken or written disclaimers about the asset’s volatility or if they do, they are barely noticeable.
In a social media post for CoinDCX’s ‘Bitcoinliyakya’ campaign, actor Nora Fatehi says, “Investing in bitcoin and cryptocurrencies is completely legal and safe.”
ET spoke to two lawyers who confirmed that crypto falls in a legal grey area in the country.
If #bitcoin advertising can happen like this why not MF? @mohanty_swarup
— Sanjay Tripathy (@Sanjay_Tripathy) 1624112071000
A self-regulatory code that the exchanges follow as part of the Blockchain and Crypto Assets Council includes voluntary compliance with anti-money laundering, combating terror financing, and Know Your Customer rules. However, it does not include guidelines on advertising.
A crypto exchange executive, who did not wish to be named, said any consensus on regulation would be good for the industry, but there was no clarity yet on how the business of crypto exchanges would 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 in crypto prices, which stretches back to the start of the Covid-19 pandemic last year, made quite a few 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 ran into lakhs of rupees.
“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,” Gupta said.
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.”
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, he added.
Indians over 45 are exploring the wild west of cryptocurrency