Know your rights before investing in digital assets

To understand the rights granted to you when dealing or transacting in cryptocurrencies, you must first understand how this ecosystem works. Going back to the basics, cryptocurrencies are an unregulated asset, usually traded or transacted on cryptocurrency exchange platforms. These platforms offer investment options, similar to the features available for the conventional stock trading setup that investors are familiar with. Cryptocurrencies and non-fungible tokens (NFTs), among other virtual digital assets (VDAs), are typically stored on digital wallets. These wallets could be tied to a particular exchange or be offered by any other service provider, which is neither an exchange itself nor the underlying technology on which the VDA is based.

Amidst all the cautionary advice issued by the government in the face of technology-related risks, end users should familiarize themselves with what they can expect from these service providers and online platforms.

Although no law governs the ecosystem, an investor is not left without any redress. Investors can always avail themselves of the rights granted by information technology laws: (i) to have their grievances addressed through an established mechanism made available by the provider; (ii) expect their data to be safe and secure in the online environment and transactions; (iii) be able to seek remedies against cybercrimes ranging from fraud to theft of funds to identify theft and any phishing-related issues (this will also find remedies under criminal laws, through the Indian Penal Code); (iv) to be able to make changes to their profile registration, including updating and correcting their banking information and other personal information.

Under obligations under applicable data privacy laws, users are permitted to withdraw their consent to the continued processing of their data; this may allow the user to terminate their relationship with a crypto platform and request the deletion of their profile.

A consumer in India also has the right to: (i) be heard; (ii) repair; (iii) security; (iv) be informed; (v) consumer education, in all sectors. In addition, under consumer laws, users must be provided with all the information necessary to reach a reasoned decision regarding the platform’s offerings. Taking inspiration from the US Securities Exchange Commission and Sebi, the Central Consumer Protection Authority also recently issued separate guidelines for monitoring and regulating advertisements. This would also apply to platforms involved in VDA transactions.

In addition to the statutory rights discussed here, users are further governed by the specific terms and conditions of the cryptocurrency platform, digital wallets, so engaged by the user for cryptocurrency-related transactions. The terms and conditions of each platform will depend on the products and services offered, and will be specific to the service provider, without necessarily having to be comparable to another platform or service provider. Some platforms such as Coinbase, CoinSwitch, Binance, and CoinDCX have gone to the trouble of educating their users and make the consumer wary of the associated benefits and shortcomings of service and product offerings. Users are advised to review the terms and conditions of any product/service available online, in order to understand the risks, benefits and limitations of contracting with such agencies.

It is important here to understand that since this market is unregulated, reliance on laws stems from a milieu of information technology laws (intermediary, privacy and data protection), privacy laws consumers, contractual obligations and the penal code.

As there is a direct contract between the Platform and the End User, some of the rights granted to you as a User are at the sole discretion of the Service Provider, the particular Platform, in addition to what is mandated by law.

Abhishek Malhotra is Managing Partner at TMT Law Practice.

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