Celebrities Show Crypto Ads on Sebi and Asci Radar After Value Crash

According to some media reports last week, the capital market regulator, the Securities and Exchange Board of India (SEBI), suggested to the Parliament’s Standing Committee on Finance that celebrities should not be allowed to endorse cryptocurrencies.

About two months ago, the Advertising Standards Board of India (ASCI), a self-regulatory body for the advertising industry founded in 1985, issued a detailed set of guidelines, to be in effect from April 2022, for advertisers and celebrities on how cryptocurrencies or any digital asset should be advertised. Another default. The hype that many cryptocurrency exchanges made about these announcements in the past year has made its way back home, with cryptocurrency prices dropping sharply this year.

Between November 2021 and now, the price of bitcoin has fallen by 47 percent. The price of Ethereum fell by 48 percent. Luna (a cryptocurrency, not an antique two-wheeler) has almost completely lost its value; Its price has fallen by almost 100 per cent (from Rs 3,535 to nearly zero) in this time period.
“Investors are staying away from risky assets like cryptocurrencies as US policy makers tighten monetary policy. This has driven down stock and cryptocurrency prices,” says Akshaya Bhargava, founder and CEO of Bridgeweave, a UK-based fintech company. He adds, there are also crypto-specific issues contributing to the continued decline, such as the loss of Terra’s ground tank to peg its currency to the dollar and the Luna disaster.

The big lesson for investors, who fell into the trap of catchy crypto ads by famous Bollywood actors and actresses last year, is to do your own research. In the past year or so, many investors have bought cryptocurrencies for the first time, with cryptocurrency prices hitting new highs almost every day.

Financial planners call this “fear of missing out,” or FOMO. Based on great reviews by social media influencers, many millennial investors have invested small to large sums in cryptocurrencies. Raj Khosla, founder of MyMoneyMantra, says it is best to invest less than 1 percent of your net worth in cryptocurrency, if necessary.

Rishabh Barach, a chartered accountant and founder of NRP Capitals, agrees. He says that investors should avoid investing in cryptocurrencies if they do not understand how cryptocurrencies work.

Be wary of cryptocurrency lending and deposits

Investing in cryptocurrency has taken on new colors over the years. For example, many cryptocurrency exchanges allow investors to pledge their existing stock of coins and borrow money. Or even give them a chance to earn passive income. Many cryptocurrency exchanges in India allow you to earn money by lending and depositing coins like Bitcoin (BTC), Ethereum (ETH), Tether (USDT), Dai (DAI), etc.

For example, ZebPay allows you to lend for 7 to 90 days. However, both shows can come back to haunt you at times like these when cryptocurrency prices crash. Here’s how it works.

Let’s say you have some coins that you are sure you won’t sell for months or even years. In the meantime, their values ​​continue to fluctuate and you get a paper income. Instead, cryptocurrency exchanges allow you to deposit these currencies with them, and in return, they offer you the opportunity to earn a monthly income of 10-20 percent.

In the meantime, exchanges sell your coins and create additional liquidity, which is easier than mining coins; An otherwise complex process of creating new coins using large, expensive warehouse-sized computers. These schemes usually run for a few years as you, the depositor, receive passive income (interest income). Once the holding period expires, you will get your coins back.

Here’s the caveat: interest is paid in cryptocurrency, not fiat currency. If the prices of your coins go down, you lose money. The mechanism works like a bank deposit on which you earn interest, but unlike a bank deposit guaranteed by the Reserve Bank of India Deposit Insurance and Credit Guarantee Corporation (subject to a certain amount), cryptocurrency deposits are not. This is the other danger. In the meantime, Barach says, if the exchange crashes or your wallet gets hacked, you could lose all your coins and have no legal recourse.

Similarly, you can also borrow money by pledging your coins. Here too, the value of the pledged coins can drop significantly within a short period of time. Not only can the exchange (which loaned you money) sell your coins in a hurry, you will also need to make up for the exchange’s loss, as well as seeing the value of your assets dwindle.

Salman Khan is not always right!

Manisha Kapoor, CEO and General Secretary of ASCI, tells us that since last year when many such announcements went viral, ASCI has become more vigilant about celebrities endorsing cryptocurrency. “It is precisely for this reason that ASCI guidelines have been introduced. We have noted the long claims that have been made, and the massive returns that have been pledged, all without exposing the potential downsides of these investments. We know that crypto products have no tangible intrinsic value, and they are highly volatile.” Leading finance experts have expressed concerns about how cryptocurrencies are valued. Thus, there are specific risks that consumers should be aware of before they invest,” says Kapoor.

It adds that since the guidelines went into effect in April 2022, ASCI has seized violations in four crypto advertisements and 25 advertisements related to influencers on crypto products. ASCI certainly does not pre-approval of advertisements; In other words, these ads were already circulating.

The Indian government has turned its attention to cryptocurrencies since late last year, and especially since the 2022 budget, when the finance minister imposed a 30 percent tax on virtual digital assets and a 1 percent tax deduction at source (TDS).

With ASCI detailed guidelines on celebrity endorsements and SEBI and RBI sharpening their focus on cryptocurrencies (full legislation pending), we hope that announcements like Ayushmann Khurrana’s CoinDCXThe future is Yahya Hai(This Is the Future) or Ranveer Singh Ads for CoinSwitch Kuber’sKuch Toh BadlijaIt will be a thing of the past.

“SEBI’s proposal to ban celebrity endorsement of cryptocurrencies is badly needed,” says Marin Agarwal, founding director of Finsafe India Private Limited. “Most of the ads showing these influencers were misleading and made ordinary investors think that their money would multiply quickly without any risk. Hopefully, with the new guidelines There will be a consolidation of information.”

What should investors do?

The recent crash in cryptocurrency prices has not surprised the savvy and experienced investor. But those who have invested in cryptocurrency for the first time in the past two years have felt how quickly they can lose their money.

For those who still want to continue their crypto journeys, despite the risks and lack of regulation, there are two words of advice: “Avoid gambling in cryptocurrencies. Post only the amount you can afford to lose,” says Barach.

“Book dividends frequently,” says Darshan Bateja, CEO of crypto exchange Fold. Allocate assets, but be disciplined.