Sebi red flags celebrities endorsing Cryptos
India Today
Sebi said that crypto assets are neither defined as securities under Securities Contracts (Regulation) Act, 1956 or SCRA, nor are they notified as securities by the Central Government.
The Securities and Exchange Board of India (Sebi) has red-flagged prominent public figures, including celebrities, sportsmen, etc. endorsing crypto products in any kind of advertisement. Based on the premise that cryptos are unregulated entities, the Sebi informed a parliamentary panel that any prominent public figure must be held responsible for making endorsements which result in case of possible violation of the Consumer Protection Act or any other law.
The regulatory body for the securities and commodity market in India said that terms like 'securities', 'derivatives', "commodity derivatives", "stock exchange", "clearing corporation", 'custodian' and 'depositories' should not be used in advertisement of crypto products or crypto exchanges.
In a detailed reply to queries by members of the panel, the Sebi, while making its stand clear on cryptos, said, "since crypto products are unregulated, endorsement or any advertised message, verbal statement, demonstration or depiction of the name, signature, likeness, or other identifiable personal characteristics of an individual or depiction of the name or seal of any institution or organisation which makes the consumer believe that it reflects the opinion, finding or experience of the person making such endorsement."
Member MPs of the parliamentary panel asked the Sebi to submit its response on what the board controlled by the Ministry of Finance was doing about Cryptocurrencies, as the Reserve Bank of India (RBI) on record has been dismissive about Cryptocurrency.
The members also asked the Sebi about its view on crypto classification. According to sources, the Sebi clarified that Crypto assets are a tokenized version of assets and all assets cannot be construed as securities and, therefore, the tokens issued on those assets also cannot be construed as securities.
Further, the Sebi said that crypto assets are neither defined as securities under Securities Contracts (Regulation) Act, 1956 or SCRA, nor are they notified as securities by the Central Government.
Sebi flagged the need for a suitable notification for clarity. It stated, "Tokenisation of asset and running it on a decentralised platform is still linked to the underlying asset it represents. The extant laws applicable on the underlying asset may be applicable on the tokenised asset too. Under these circumstances, it is not clear whether/which crypto assets/ cryptocurrencies can be legally defined as securities."
