The regulatory environment in India is increasingly becoming difficult for the crypto sector. In the latest development, the securities and commodity markets regulator has said that celebrities should stop endorsing crypto products.
The Securities and Exchange Board of India (SEBI) argued that digital assets such as cryptocurrencies, NFTs, and Defi products are unregulated and no legal recourse is available if they turn out to be fraud and investors lose the money.
Celebrities who endorse these products may run the risk of misleading consumers with wrong or hyped information, which is a violation of the Consumer Protection Act, 2019. Since these products involve the transfer of money, many other laws get involved. As per a media report, violation of these laws can land the celebrities who endorse crypto products in serious trouble, SEBI said in a report submitted to the Parliament’s Standing Committee on Finance.
Punishment for misleading endorsement
As celebrities have a great deal of influence on consumers, any misleading or unsubstantiated claim on their part can lead to consumers making risky investments. In light of the punishments prescribed for such information by advertisers, celebrities should check the facts before endorsing a crypto product, SEBI suggested. For example, a wrong or misleading claim by a celebrity will violate the Consumer Protection Act, 2019, which prescribes a fine of up to Rs 1,000,000 (Appr.$12,500) for the first instance of a felony. In the second instance, the fine can be up to Rs 50,000,000 ($62,500), the media report said.
Besides, SEBI argued that the disclaimer prescribed by the Advertising Standards Council of India (ASCI) for crypto products should be more exhaustive to include the component that says that the crypto product might be violating one of the many laws that such transactions might entail. These include laws about money laundering and foreign exchange, for example.
Unfriendly business environment
The latest SEBI recommendation is part of a series of stringent measures that the Indian authorities have initiated against the crypto industry. Recently, a report said that the Goods and Services Tax department is planning to levy the highest 28% tax on crypto activities. A law committee is believed to be studying the crypto market and various activities in its domain to formulate appropriate tax provisions.
From April 1, 2022, India started taxing crypto profits at a hefty 30% without giving the relief of offsetting the losses. A 1% TDS has also been approved and will come into effect from July 1, 2022.