Understanding the influence factor
The Securities and Exchange Board of India (Sebi) has hoisted the red-flag as it issued a directive to ban prominent public figures, including celebrities, sportsmen from endorsing crypto or crypto products in any kind of advertisement and a violation would mean they would be held responsible for making endorsements which result in case of possible violation of the Consumer Protection Law, and a risk of prosecution for possible violation of other laws including FEMA, BUDS Act, PMLA.
The precedent finds its roots in the US before making its way to India. A few influential celebrities had misled investors about crypto for which they faced multiple lawsuits. Following the fiasco, the immediate question arose: are Indian celebrities at similar risk? The use of voice from any of the popular figures is not acceptable either for advertisements/endorsements involving crypto, and SEBI made it clear in their response.
In October 2021, CoinDCX, a cryptocurrency exchange, roped in Ayushmann Khurrana to feature in their ad campaigns and to address key concerns surrounding crypto investments and myths related to cryptocurrencies. CoinSwitch Kuber, a cryptocurrency exchange signed Ranveer Singh as brand ambassador the same month to lure Gen Z and millennial investors while Salman Khan unveiled $GARI in October 2021 too, a crypto-token launched by micro-content, short video application Chingari, along with announcing his collaboration with the app as a brand ambassador for its NFT marketplace and token reward program on Twitter
Celebrities from all fields are highly influential in India. Any statement or claim they make can swing public opinion in either direction. They are edified and worshipped by millions. Enter cryptocurrency. Because crypto remains unregulated it leaves no room for negligence. Celebrities themselves are generally unaware of crypto or its pitfalls and hence the regulator has laid out that any celebrity violator may be penalised up to Rs 10 lakh by the CCPA on account of false claims or even misleading ads. A repeated violation can escalate the fine to a further Rs 50 lakh and even lay a ban of up to 3 years for any other products.
ASCI set the ball rolling when it laid out its guidelines, that all ads must carry a disclaimer saying, “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” SEBI suggested that the given disclaimer by the ASCI must add the possible law violations in crypto transactions. “Dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc.”
Many innocent retail investors, get swayed by celeb endorsement, stake all their savings into cryptos and end up in most cases on the losing side. The endorsement by no means help analysing the risk-return ratio, tech and moreover all these exchanges are unregulated. However, the rampant practise will continue.
A point to note however, is that the purview of the SEBI directive does not cover other influencers on say Instagram and TikTok. These “stars” will endorse. Given the influence that celebrities have over consumers, It’s important that consumers are made aware of the risks that these products carry. While it is the duty of the Government to protect its citizens and investors, we definitely must create more awareness around this ecosystem. Ultimately, aware investors are less likely to get swayed by celebrity hype.
Many innocent retail investors, typically get swayed by celeb endorsement, stake all their savings into cryptos and end up in most cases on the losing side