Advertising watchdog catches violations in crypto ads by influencers

Representative Image

Ever since the Advertising Standards Council of India (ASCI) came out with guidelines to advertise virtual digital currencies in April 2022, it has processed violations in as many as 29 advertisements. Manisha Kapoor, CEO and Secretary General, ASCI, says that these violations pertain to social media influencers not having disclosed that the posts were paid promotions by crypto companies as well as direct ads by crypto companies. Kapoor refused to divulge the names of the social media influencers who have been pulled up by ASCI because “the hearings and appeals process are still ongoing”, she adds.

ASCI’s guidelines for advertisements of virtual digital assets (including cryptocurrencies, non-fungible tokens and so on) came into effect on April 1.

Among the dos and don’ts of cryptocurrency advertisements, the guidelines detail how companies can advertise, and what they can and cannot say. For instance, the ads should clearly highlight that cryptos are “highly risky instruments” and how audio and visual advertisements must also carry disclaimers.

The guidelines also prohibit the use of words like ‘currency’, ‘securities’ ‘custodian’ and ‘depositories’. The advertisements cannot promise or guarantee any returns and no minor should be seen dealing in cryptocurrencies in the advertisements. ASCI is a self-regulatory body of the advertising industry established in 1985.

Crypto advertisements on a high

Last year— and on the back of the phenomenal rise in cryptocurrency prices —television was flooded with many commercials where Bollywood stars and celebrities were seen advertising cryptocurrencies. Many of these advertisements were seen making tall claims about how cryptos are safe, simple, the next big thing, and so on.

In reality, cryptocurrencies are quite the opposite; they are risky, have no underlying asset and are prone to huge bouts of volatility, as seen in the recent massive crash in cryptocurrency prices.

Between November 2021 and now, Bitcoin’s price fell by 47 percent. Ethereum’s by 48 percent. Luna (another crypto coin) lost almost its entire value; its price fell by nearly 100 percent (from Rs 3,535 to nearly zero) in this period of time.

Tackling violations

Explaining the process of how ASCI spots violations, Kapoor says the body can either get complaints from consumers, if they believe they have been misled, or they take suo moto action.

“We track more than 400 TV channels, more than 700 publications, more than 3,000 websites as well as use artificial intelligence to scan social media platforms like Instagram and YouTube,” says Kapoor.

After ASCI gives a notice to the advertiser—and in some cases the influencers if they are a part of the campaign—they either make a correction or defend themselves and stand their ground. Here, an ASCI jury reviews the arguments of advertisers before the body finalizes its final recommendations.

“Sometimes, when the ads or claims are technical, we consult technical experts as well,” says Kapoor. If the errant ads still persist beyond the compliance date, ASCI escalates the complaint to the Department of Consumer Affairs and other relevant regulators, to take further action. This is to ensure that consumers are protected from mis-selling, among other misdemeanors. Kapoor is optimistic and says that ASCI typically sees 97 percent voluntary compliance.

In the recent violations, Kapoor says that many of the advertisements involve influencers who have spoken highly of cryptocurrencies but failed to disclose that they were paid money to endorse cryptocurrencies.

In other words, the advertisements looked like the influencers are putting out content on their own but in reality, they were sponsored.

Also read: When crypto prices fall, Ayushmann Khurrana, Disha Patani, Ranveer Singh are of little help

Doing due diligence

Rachana Ranade, one of India’s most prolific influencers in the finance space, says that it is vital that social media influencers are diligent. She says that unlike Bollywood celebrities who talk on cryptocurrencies, viewers and consumers take financial sector influencers more seriously when they speak on cryptocurrencies.

Ranade’s YouTube channel, where she uploads videos on financial awareness, has 3.7 million followers and another 6.60 lakh followers on her Instagram channel.

Ranade frequently talks about cryptocurrencies on her YouTube channel. Many of her crypto videos are sponsored by advertisers like CoinSwitch Kuber, a popular cryptocurrency exchange.

Her latest video on the ‘Top 5 Cryptos to invest in 2022’ carries a disclaimer, both, which you can see on screen and can hear the narration, a disclosure that says "crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transaction. For any queries reach out to: ‘support@coinswitch.co". In the description box of the video below the video screen, Ranade writes ‘includes paid promotion’ and again, the above disclaimer.

The rise of social media influencers

Proliferation of social media platforms like Twitter, YouTube, Facebook and Instagram has led to a sharp rise of social media influencers who endorse just about anything—from mutual funds to cosmetics to giving tutorials and spreading awareness on investment products, initial public offering (IPO) recommendations, or even promote investment and robo-advisory platforms.

Due to their reach (and mass appeal in many cases), brands are only too happy to latch on to them for a fee. In exchange, they get attention.

The higher the number of followers, the higher the fees. Influencers roughly charge as much as Rs 1-2 lakh a video, sometimes as high as Rs 4 lakh.

Part of the deal, says Pranjal Kamra, a popular social media influencer in the finance space who owns Finology, a robo-advisory platform, is a mention of a brand. He says that in a typical 10-minute video, the influencer is required to mention the brand’s name for at least a minute’s worth of time.

Kamra, himself a YouTube sensation with over 40 lakh followers, doesn’t endorse cryptocurrencies. He says that typically influencers who are big on Instagram and LinkedIn speak about cryptocurrencies. Those, like him, who are on YouTube, prefer to stay away.

“Instagram is where the very young crowds hang around. They like cryptocurrencies. Similarly, LinkedIn is where a lot of influencers from technology background flourish, they talk about cryptocurrencies, blockchain, and so on. Here as well, cryptocurrency is a popular discussion,” explains Kamra.

Ranade says that she has been speaking about cryptocurrencies for more than a year. Aside from videos that are her own initiatives, Ranade is comfortable in doing paid promotions, so long as she makes the necessary disclosures and viewers of her channel are made aware that they are paid promotions.

“I call these brands knowledge partners. All such videos are paid campaigns,” says Ranade. She says that in the first year, crypto videos were sponsored by WazirX, another leading crypto exchange where you can buy and sell crypto coins.

But she insists that she does not recommend cryptos. These are education videos, she adds, where she talks about basics, how to buy and sell cryptos, what the exchange platforms offer, how you can check prices and so on.

Look before you leap

As an investor, read before you invest in cryptos. Don’t get swayed by your favourite Bollywood star talking highly about cryptocurrency. If an investment is unregulated and volatile, then it’s best to stay away unless you understand what’s at risk.

Ranade compares crypto investing to setting aside money for a party fund. When you go to party and splurge, say Rs 5,000, you are comfortable to spend that money in one go. Investing in crypto, she says, is the same way. “The money you invest in crypto should be equal to an amount that you are willing to risk without disturbing your peace of mind,” she adds.