With billions of dollars pumped on TV, news channels, digital media platforms, newspapers, sports and events sponsorship, and so on, crypto exchanges have attracted global attention.Â
But, this has led to red flags raised by various authorities globally, as some crypto exchanges in a bid to attract new users have been misleading youth with false promises and huge returns if investment in crypto is made.
The Indian response
India was the first country to ban crypto advertisements in November 2021 that were misleading youth through over-promising & non-transparent advertising.
It is to be noted that exchanges with investment from venture firms have even roped in celebrities for promoting such misleading advertisements, some have even started special features on news channels on crypto under the garb of creating awareness, which was told to stop immediately.
Understanding the gravity of this issue, Indian prime minister Narendra Modi chaired a meeting to consider the regulatory prospects for cryptocurrencies with the Reserve Bank of India (RBI) and the ministries of Home Affairs and Finance, where a strong consensus was reached to stop all misleading advertisements by crypto exchanges.
Officials said that unregulated crypto markets will not be allowed to become avenues for money laundering and terror financing and it was decided in the meeting to take proactive steps and to have a close watch on the Indian crypto sector.
UK and Spain: strong regulation on its way
India is not the only one that has taken such a decision. Countries like the UK and Spain have also clamped down on misleading advertisements on cryptocurrency investments, which may cause crypto investors to lose money.
Taking this forward, the UK government has decided to bring a law in this regard, whereas, the Spain government has decided to bring in new guidelines that will come into effect from 17 February 2022.
Announcing the new regulation, Spain’s National Securities Market Commission said that all crypto advertisements will have to warn investors that investments in crypto-assets are not regulated and that all of the investors’ money could be lost.
The Spanish regulator in a circular published on 10 January 2022 said that they are introducing new rules on the advertising of crypto assets.
On the other hand, the UK government said that any crypto asset promotions need to be within the scope of financial promotions legislation, which means that any exchanges or crypto project will have to abide by the laws that are applicable for stocks, insurance, or other investment solutions.Â
Speaking on this, Visa India and South Asia head TR Ramachandran while speaking at the virtual event organized by the fintech company said that by advertising high returns, the crypto industry is killing the goose that lays the golden egg.
The Financial Conduct Authority (FCA), a UK watchdog tasked with regulating financial firms, said that they will soon start consulting on their proposed financial promotions rules for cryptocurrencies.
UK finance minister Rishi Sunak said that though crypto-assets can provide exciting new opportunities and offer people new ways to transact and invest, it is paramount that consumers are not being sold products with misleading claims.
The problem of misleading crypto advertisements is not restricted to any region and as more and more investors join the market, the risk will rise further. We can expect more such regulations on crypto to come up from different corners of the world in the coming months, Ramachandran underlined.
The problem started when many crypto exchanges started advertising that investing in crypto can provide users with four times the return in just six months, which is very high when compared to banks and other financial institutions.
As now crypto advertisements have been under watch, it is high time for exchanges to follow some principles for gaining new users and not make any false promises.
