Are Advertisements Put Out by Cryptocurrency Exchanges Misleading?

Advertisements promoting investment in cryptocurrency flagrantly violate so many rules pertaining to the Consumer Protection Act 2019 and also fall under the category of 'irresponsible' advertising.

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The expectation is simple: “Kuch to badlega (something will change)”. The message is clear: invest in cryptocurrency for a better future. If the change is for worse, why would anyone invest anyway? The set is also rural, almost like the majority of India: a garage/mechanic shop. The actors are like your next-door neighbours, and predominantly male. The language is simple too, anyone can grasp it.

But the implications? Let’s see.

During the just-concluded International Cricket Council (ICC) Men’s T20 World Cup and 13th season of Indian Premier League, there were a lot of advertisements on finance-related products, the majority of them were regarding trading in stocks or cryptocurrencies or mutual funds.

CoinSwitch Kuber’s, CoinDCX’s and Bitbns’s were/are those advertisements. All these platforms function as cryptocurrency exchanges. Their advertisements (see here, here and here) which were aired (Bitbns has paused its advertisements) and are being aired on platforms like Hotstar and YouTube are very catchy. They are inviting you to invest in cryptocurrency.

Also read: Cryptocurrencies Prices Drop in India As Govt Lists Bill to Regulate Sector

But do you know what are cryptocurrencies? If CoinDCX’s advertisement is to be believed, it is simple. The tagline of the advertisement is “Simple hai, Safe hai, Future yahi hai (it is simple, it is safe and it is the future)”.

However, are these advertisements legal?

Unlike the cloud of uncertainty surrounding the legality of cryptocurrencies in India, answering the question on the legality of the advertisements might not be that difficult.

It is my hypothesis that the advertisements of these three cryptocurrency exchanges are not legal.

Misleading advertisements

Section 2.28 of the Consumer Protection Act 2019 (hereafter Act) defines “misleading advertisement”. It says that “misleading advertisement” in relation to any product or service, means an advertisement, which –

(i) falsely describes such product or service; or

(ii) gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or

(iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or

(iv) deliberately conceals important information. [emphasis added]

Let’s see then if the advertisements of these three service providers are misleading advertisements or not.

The italicised portion of Section 2.28, which defines misleading advertisement and is reproduced above, says that a misleading advertisement is one which “gives a false guarantee to or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service” or which “deliberately conceals important information”.

It is my argument that the advertisements under discussion are misleading advertisements due to both these reasons.

Bitbns ad

The advertisement of Bitbns promised that its Bitcoin fixed deposit got the investor a return that is four-time more than bank deposits. In the uncertain crypto space, where people have lost millions of dollars in just one cryptocurrency, and where countries have banned cryptocurrencies, making such egregious claims is misleading, to say the least.

In my opinion, the claim made in Bitbns advertisement “gives a false guarantee”. As a matter of fact, that specific advertisement where this claim was made is now not available on Bitbns’s Youtube channel, whereas its other advertisements are available. These other advertisements also violate consumer laws.

For example, these 30-second advertisements run a disclaimer for only two seconds and are not even read out to the viewers. Further, the disclaimer, which reads “Cryptocurrency is not a legal tender and subject to market risks (sic)”, is in very small font and is not even properly visible. This, I argue, amounts to “deliberate concealment of important information”.

Screenshot of ‘Bitbns’ advertisement’s disclaimer.

CoinDCX ad

The advertisement of CoinDCX also misleads viewers to the nature of cryptocurrencies. Its tagline has the words “simple” and “safe”. In my opinion, these two words can’t be associated with cryptocurrencies and their exchange in India. In fact, in a disclaimer (which conceals information), the advertisement itself says that “cryptocurrency is unregulated digital currency and not legal tender in India”.

Further, this disclaimer which follows the advertisement is five seconds long and is spoken in English, unlike the advertisement where the actors speak in Hindi or its variants; and is spoken in such a manner that it is incomprehensible to a common viewer. This, I argue, amounts to the deliberate concealment of important information. All a viewer will remember is that Ayushman Khurana was making a pitch for investment in cryptocurrencies which are safe and simple and are the future.

Screenshot of ‘CoinDCX’ advertisement’s disclaimer.

CoinSwitch Kuber ad

The narrative of cryptocurrency being simple runs through the advertisement of CoinSwitch Kuber also which claims that “sab simple hai (cryptocurrency is simple)”.

One of their advertisements begins with one of the actors complaining that he can’t understand crypto, to which the other (prominent and well-known) actor replies that it is not difficult, in fact, it is easy to understand crypto. But he doesn’t explain how and why is it easy to this other actor who was complaining about the difficulty in understanding cryptocurrency (BitCoin to be more precise). So this advertisement is also likely to “mislead” the consumer as to the nature of cryptocurrencies.

This advertisement also has a disclaimer of five seconds, which is comparatively more comprehensible than the one of CoinDCX. But this disclaimer again is in the English language whereas the entire advertisement is in Hindi. It reads “cryptocurrency is an unregulated digital asset, not a legal tender and subject to market risks….”

Interestingly, the disclaimer also reads (and is not read out to us like the other parts of the disclaimer) that “CoinSwitch Kuber does not guarantee any assured returns or profit”. The font size of this disclaimer is so small that it is very difficult to read. Therefore, I argue that this advertisement is ‘deliberately concealing important information’ and hence is a “misleading advertisement” under the Act.

Screenshot of ‘CoinSwitch Kuber’ advertisement’s disclaimer.

Legal aspects

On July 14, in response to a Civil Writ Petition filed in the Delhi high court, a notice was issued to various cryptocurrency exchanges, including CoinSwitch Kuber, CoinDCX, WazirX, SEBI and the Central Government. The plea was against the disclaimer issued in the advertisements of these exchange platforms. It prayed the court to issue direction to SEBI (Securities and Exchange Board of India) to issue guidelines mandating disclaimer text covering 80% of a screen, with a slow voice-over, lasting five seconds, against audio-visual advertisements run by crypto-asset exchanges.

The division bench hearing the matter (comprising Chief Justice D.N. Patel and Justice Jyoti Singh) could not meet on October 22 and the matter has now been listed for hearing on December 3, 2021.

In the meanwhile, as pointed out earlier, the advertisements have included a five-second segment of disclaimer. But the language, speed and font of the advertisements (audio and visuals) are still problematic.

After the notice was issued on July 14, CoinDCX joined the Advertising Standards Council of India (ASCI). ASCI is a voluntary Self-Regulation council, registered as a not-for-profit company under Section 25 of the Indian Companies Act, and is recognised by some Central legislations and other important stakeholders. ASCI has a Code for Self-Regulation of Advertising Content in India (ASCI Code) which has been referred to in various judgments by Indian courts (see Havells India Ltd. Anr. v Amritanshu Khaitan Ors.; Horlicks Ltd. and Anr. v Heinz India Private Limited).

In fact, when the current Act was being revamped, the Standing Committee had recommended giving legal backing to the ASCI Code, but that recommendation was rejected. Nonetheless, the ASCI Code remains a very relevant advertising guideline.

Upon joining the ASCI, the CEO of CoinDCX had said that “the involvement reaffirms our commitment towards ensuring safety and security for our users, and to raise the bar for advertising transparency in crypto space in India”. The current advertisements of CoinDCX were released after the exchange joined ASCI.

Interestingly, point 1.5 of Chapter I of the Code states:

“Advertisements shall not be so framed as to abuse the trust of consumers or exploit their lack of experience or knowledge. No advertisement shall be permitted to contain any claim so exaggerated as to lead to grave or widespread disappointment in the minds of consumers.”

The Code then lists out six examples of such, one of which states,

“Advertisements inviting the public to invest money shall not contain statements which may mislead the consumer in respect of the security off­ered, rates of return or terms of amortization; where any of the foregoing elements are contingent upon the continuance of or change in existing conditions, or any other assumptions, such conditions or assumptions must be clearly indicated in the advertisement”. [emphasis added]

Cryptocurrency exchanges like CoinSwitch Kuber and CoinDCX invite the public to invest money. Their ‘safety narrative’ has the potential to “mislead the customer in respect of security offered” in investing in cryptocurrencies.

While the disclaimer of CoinSwitch Kuber reads “CoinSwitch Kuber does not guarantee any assured returns of profit”, Bitbns entices with the promise of four-times returns. As for CoinDCX, it does not clarify anything regarding rates of return. Further, though their advertisements give some degree of caution regarding investment, the disclaimers are either read at a speed that is incomprehensible or not visible properly or is read in a language which is different from the language of the other parts of the same advertisement.

Moreover, these advertisements inviting the public to invest money are “contingent upon change in existing conditions”. Cryptocurrency is not a legal tender in India yet. In 2018, the Reserve Bank of India issued a notification deciding that “entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs”. Upon challenge, the Supreme Court of India held the notification “unconstitutional” (Internet and Mobile Association of India v Reserve Bank of India).

Also read: Can Bitcoin Become a Real Currency? Here’s What’s Wrong With El Salvador’s Crypto Plan

Despite this, there is no surety that, like China, India will not ban cryptocurrencies. According to the latest reports, while a ban seems unlikely, the exact categorisation of cryptocurrencies is uncertain with some reports claiming that they will be treated as ‘assets’, not as ‘currencies’.

And while the advertisements under discussion provide disclaimers, these are either read at a speed that is incomprehensible or not visible properly or are read in a language that is different from the language of the other parts of the same advertisement. Either way, one thing is certain that investing money in cryptocurrency is “contingent upon a change in existing conditions” and such conditions “must be clearly indicated in the advertisement”.

Impact of irresponsible advertising

The aim of this article is to highlight the possible negative economic impacts of the advertisements under discussion on individuals. The impact must be understood in the context of the targeted audience: youth and most probably male (considering the total absence of female actors in the advertisements, barring this one).

Further, the advertisements are disseminated through electronic media which has a wide reach. In Glaxosmithkline Consumer v Heinz India (P) Ltd., the Delhi high court had noted:

“This Court is conscious of the powerful and lasting impact that audio visual images have on viewers. Unlike the printed word, which is processed analyzed, and assimilated uniquely by each individual, an advertisement in the electronic media, particularly, has a different impact.

First, it has a wider spread; it is perceived aurally through different senses, such as sound, visual, and printed. The suggestive power of this medium is greater.

Second, such advertisements use several different tools, like music, dialogue, colors, and other aids, to bring home the message. Advertisements through this medium can, and do operate at conscious and subconscious levels; their power of suggestion extends not just to the discerning, or educated viewer, but to an entire range of viewership, with diverse income earning capacities, educational attainments, tastes… They influence even children. The impact of a catchy phrase, a well-acted skit or storyline, or even distinctive sounds or distinctive collocation of colors, can well define the brand or products image, by imprinting it in the public memory forever.” (Para 27)

To assess the impact of the advertisement issued in the audio-visual media, the Madras high court had noted in Gillette India Limited v Reckitt Benckiser (India) that the court should “keep in mind the fact that watching televisions and surfing internet are part of the daily routine in every household and advertisements have a great impact on viewers, who are potential buyers of consumer goods”. (para 108). “It should also the potential users of the goods and services advertised.” (para 109).

Need for responsible advertising 

In the light of the foregoing discussion, readers might look at the advertisements of ‘MutualFundsSahiHai’.

In one of their latest advertisements involving Sachin Tendulkar, the act narrates the story of a driver getting influenced by an earlier advertisement involving Sachin and says that he is going to invest all his money for gains, as suggested by Sachin in the earlier advertisement. At this point, Sachin suggests to the driver that before investing, he must consult an expert to understand the pros and cons of investing in mutual funds.

Unpragmatic as it might sound (asking a driver to consult an expert before investing), this advertisement goes to the extreme end of promoting responsible advertising. The disclaimer which follows the advertisement is also very clear and is in the same language as the rest of the advertisement.

Screenshot of ‘MutualFundsSahiHai’ advertisement’s disclaimer.

Considering the limited nature of current research, I have not dealt with the question “whether these advertisements also amount to ‘unfair trade practice’ under the Act”?

I implore the readers to answer that question. Reference can be made to the Supreme Court of India’s judgment in the case of Lakhanpal National Ltd. v M.R.T.P.Commission & Another, especially paragraph 7 of the judgment.

It is hoped that the cryptocurrency exchanges under discussion will become more responsible in their advertising in near future. They are asking the public to invest in cryptocurrencies which is a risky proposition, like any investment. It is only natural that they make more responsible and informative advertisements. The hope is, after this post, “kuch to badlega”, in terms of their advertisements.

Disclaimer: The author has invested in cryptocurrencies and uses the cryptocurrency exchanges under discussion in this post.

Aman Kumar is an assistant professor of law at IFIM Law School, Bengaluru. He is an alumnus of NLUJA, Assam and South Asian University, New Delhi. He regularly writes at Indian Blog of International Law.