From musicians and athletes to movie stars, the success of Bitcoin has turned heads around across all industries and professions. Recently, Kim Kardashian, famous for being famous, came into legal trouble for dropping a sly ad last year on her Instagram, asking, ‘Are you guys into crypto?’. The billionaire entertainer is reported to have paid over a million dollars to the SEC for advertising crypto for not making appropriate disclosures.
Kim Kardashian was advertising a crypto security token last year without disclosing she had been paid for it. This violated the federal security rules.
In the UK, promotion of cryptocurrencies has attracted attention, especially in cases where the target audience is the general public who may or may not be aware of the high risks associated with buying cryptocurrencies. The Guardian newspaper has reported the ban on two fan tokens related to football club Arsenal for not disclosing risks to potential buyers.
What’s bothering the regulators in countries like the US, UK or India is the highly volatile and security like nature of cryptocurrencies, which tend to shoot up in value and subsequently crash, wiping out all of investors’ wealth in a matter of days. The ICO craze, followed by the DeFi buzz, was all about projects that were mere ideas on paper, waiting for investors to pour in real money. As is common, very few business ideas actually go on to become successful, and those who survive for a few years are rarer still. Investors can be easily lured by big promises of cryptocurrencies, only to end up losing all of their investments in shady schemes and outright scams.
In the case of the football club, the fan token was not disclosed as a cryptocurrency asset, and did not clearly lay out the risks involved in buying or investing in them. While 2022 has seen a decline in promotional activities, earlier there was a huge buzz in athletic and sports sectors when blockchain and crypto ventures began to drop ads and publicity material in big events and arenas.
Among other Western celebrities, those who are known to have promoted crypto include Matt Damon, Mike Tyson, Reese Witherspoon, Paris Hilton, Gwyneth Paltrow, and many music artists. In India, a recent case was that of a Bollywood music singer who apparently was present during a video call related to a crypto venture promoting its services. Major figures like Amitabh Bachchan have had NFT collections launched.
SEBI has taken note of public figures and celebrities endorsing crypto products from the regulatory perspective. When it comes to regulating and protecting the interest of general public investors, SEBI has suggested that celebrities and public figures should not be used for endorsements, and disclosures should be in place in ads. The guidelines for advertisements have been released by the Advertising Standards Council of India (ASCI) after consultation, coming into effect from April 2022. The rules include due diligence to be observed by public figures before endorsing any virtual digital asset or VDA.
SEBI is working closely with a Parliamentary Standing Committee on Finance and the Finance Ministry on the issue of crypto advertisements. Another regulation is the Consumer Protection Act, 2019, which requires celebrities to do due diligence. In case of violations, the Central Consumer Protection Authority comes into picture to issue directives on such advertisements and their promoters, including penalties for misleading consumers.
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