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Recently, the Advertising Standards Council of India (ASCI) released a set of guidelines to regulate the advertisements of all virtual digital assets and services. This brings within its ambit inter alia services such as NFT platforms and cryptocurrency exchanges. Let us see how the crypto and NFT-related companies can modify their terms and conditions and existing contracts to ensure that they are contractually compliant with the given ASCI guidelines.
1. Disclaimer
All companies dealing in virtual digital assets including virtual digital exchanges would need to put the following disclaimer in all their advertisements:
“Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”
The disclaimer should be prominent and unmissable. The positioning and size of the video is also mandated as per the guidelines. Accompanying voiceovers need to be at a normal speaking speed and should not be spoken hurriedly.
Contractual Modification Required
Update your terms and conditions to include this disclaimer there as well.
In your marketing contracts with marketing agencies, give clear instructions so that the content being created for your advertisements is compliant with the law.
Include an indemnity with respect to non-compliance with the ASCI guidelines in your marketing agency contracts.
2. Description of Virtual Digital Assets
Words like “currency”, “securities”, “custodian” and “depositories” should not be used in the advertisement of virtual digital assets as these terms are mostly associated with regulated products.
Contractual Modification Required
In your terms and conditions make sure to not refer to your services as either of the three terms used above.
Again, provide clear instructions to your marketing partner to not use any of the three terms.
Clarify in your terms and conditions that the virtual digital asset do not qualify as securities and that you are neither a custodian nor do you provide services akin to a depository.
3. Use of Minors in Advertisements
No advertisement for Virtual Digital Asset products or exchanges shall depict a minor, or anyone who appears to be minor, directly dealing with or discussing the product.
Contractual Modification Required
Have the clear restriction spelt out in your marketing agency contracts.
When hiring a celebrity or influencer, make sure that they represent in their contract that they are not a minor. Have clear verification systems in place.
4. Associated Risks
The ASCI Guidelines mandate that the risk associated should not be downplayed. No misleading statements as to guaranteed return of profit should be provided. Virtual digital assets should not be compared to any other regulates assets in the advertisements.
Contractual Modification Required
All the aforementioned restrictions should form a part of the instructions that you provide to your marketing/content creation agency.
Apart from the mandated disclaimer, you may also put a disclaimer stating that all statements as displayed in the advertisement are for creative purposes and actual returns may vary.
Clear disclaimers to the effect should also be put in the terms and conditions of your website/application.
5. Celebrities/Influencers
Celebrities are now required to conduct a proper due diligence regarding the statements and claims being made in the advertisements related to virtual digital assets so as to not mislead consumers.
Contractual Modification Required
In your contracts with celebrities/influencers include a representation that they have done proper due diligence and it is only after the same that they are appearing in the advertisement.
Cryptocurrencies and NFTs being an unregulated class, the government is taking extremely cautious steps to ensure that the consumers are not misled. If you are running a crypto/NFT business you need to make sure that your contracts are water-tight to protect you from any potential future claims.
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