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HC Seeks Centre, Sebi Replies On Plea For Guidelines On Crypto-Asset Ads, Proper Disclaimers

The plea sought mandating the companies that the disclaimer text shall cover 80 per cent of the TV screen with voice-over read slowly.

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The Delhi High Court Wednesday asked the Centre and Sebi to respond to a plea seeking to direct the markets regulator to issue guidelines and take steps against crypto-asset exchanges advertising on television without standardised disclaimers.

A bench of Chief Justice D N Patel and Justice Jyoti Singh issued notice to the Ministry of Information and Broadcasting, Security Exchange Board of India (Sebi) and three crypto-exchanges operating in India and giving advertisements to draw retail investors to trade in crypto currencies.

The court granted time to the authorities to file replies and listed the matter for further hearing on August 31.

Senior advocate Neeraj Malhotra, representing Sebi, submitted that the petition was misdirected that the regulator for crypto-currency, if any, would be Reserve Bank of India and not Sebi.

He said Sebi is the regulator for securities market and RBI is the regulator for financial market and that the central bank should have been made a party to the plea.

The plea sought mandating the companies that the disclaimer text shall cover 80 per cent of the TV screen with voice-over read slowly.

It also sought direction to the ministry to issue show cause notices to the three companies and also pass a direction preventing any future audio-visual advertisements by the companies on TV till appropriate guidelines or circulars or notices are issued by Sebi.

The plea, filed by two advocates Aayush Shukla and Vikash Kumar, said crypto-assets are inherently riskier and more volatile investments than traditional equity investment products in the share market, mutual funds and other forms of financial products.

It said the Sebi had in February 2010, issued strict guidelines according to which audio-visual advertisements on national television should run with regard to mutual funds, investing in shares in the equity market.

“Considering the fact that crypto-assets are inherently riskier, more volatile, subject to market risks (considering that many crypto-assets increasingly are seen to function as pump and dump schemes) than traditional mutual funds products and shares in the equity market, there is an urgent need to put in place similar strict guidelines/ rules for audio-visual advertisements running on national television qua crypto-assets to provide extra layer of protection and awareness to the retail investors who are unaware of this novel phenomenon and unaware of the technicalities involved in this digital asset,” the plea said.

It said the current disclaimer text in the advertisements which says “Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks” is not in a legible font, does not include voice iteration for more than or at least 5 seconds and the line of text is smaller than the standard size, displaying for less than two seconds.

It said correct placing and appropriate size of the disclaimer may instil wisdom of researching and reading up risk profiles surrounding crypto-assets prior to investing their hard-earned money in digital assets without understanding them.