With the Finance Minister’s latest statement concerning the RBI’s stance on banning crypto-assets in India, crypto-regulation in India is caught firmly inside the gray. On the one hand, a Crypto-Invoice has been rumoured to be within the works and pending introduction to Parliament for some time, alternatively there exist already various laws that presently govern the crypto area.
Of those current laws, the Shopper Safety (E-commerce) Guidelines, 2020 (E-commerce Guidelines) lay down particular obligations on crypto-exchanges and crypto-service suppliers to make sure that the rights of customers are protected as they buy and commerce crypto-assets.
In our previous article for Medianama, we examined the protections afforded to customers beneath this laws, and the way the federal government can arrange a sensible client safety framework within the crypto-sphere. This text seems to be to construct upon that and appears to reply two key questions: How are crypto-exchanges categorized beneath the E-commerce guidelines and the way does this have an effect on their obligations in direction of customers?
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Differing Authorized Obligations
For the reason that definition of e-commerce beneath the Shopper Safety Act, 2019 shouldn’t be restricted solely to bodily items but additionally contains companies in addition to digital merchandise, the laws laid down by the regulation are clearly relevant to crypto-exchanges in addition to entities providing decentralised finance companies.
Whereas the Shopper Safety Act, 2019 solely defines the time period e-commerce, the E-commerce Guidelines draw a big distinction between two several types of E-commerce entities:
- Stock e-commerce entities are platforms that personal the stock of products and companies that they supply on their platform. Within the context of crypto-exchanges, this may seek advice from exchanges that keep a retailer of crypto-assets that they distribute to clients on their platform as and when transactions happen.
- Market e-commerce entities are these which merely present a digital platform to facilitate transactions between consumers and sellers. They don’t personal the products and companies marketed on their platform. This might embrace crypto-exchanges that don’t personal a retailer of crypto-assets however moderately have interaction in an order matching course of or P2P trade.
This distinction brings with it completely different obligations for each stock and market e-commerce entities beneath the E-Commerce Guidelines. This distinction in obligations is just logical as the problems referring to a market e-commerce entity can be functionally completely different than these referring to a listing e-commerce entity from a client standpoint. For instance, a market e-commerce entity could not have a lot management over details about the merchandise offered however must be held accountable for transparency within the precedence of itemizing merchandise and sellers. Alternatively, there can be no points round itemizing and prioritisation of sellers on a listing e-commerce platform, however there can be a better obligation to reveal correct details about the merchandise being offered.
While sure obligations imposed by the E-commerce Guidelines resembling appointment of nodal officers, prohibition of unfair commerce practices, and so forth. can be frequent to all crypto exchanges, others depend on whether or not the platform falls beneath the definition of market or stock e-commerce.
The obligations on stock e-commerce platforms are pretty simple and embrace:
(i) displaying numerous sorts of related info concerning returns, refunds, charges, and so forth.,
(ii) prohibition on misrepresenting the standard or the options of any items or companies,
(iii) making certain accuracy of commercials;
(iv) prohibition on refusal to take again or withdraw faulty items or companies together with for causes of late supply, and so forth.
The obligations for market e-commerce entities alternatively are divided between the e-commerce platform and the vendor, to make sure that every obligation falls on the social gathering that really has management over the related concern. Obligations on the e-commerce platform embrace taking undertakings from sellers concerning accuracy of details about the products being offered, displaying numerous sorts of knowledge referring to particulars of sellers, returns, refunds, charges, charge-backs, and so forth., upkeep of information, and so forth. As well as, market e-commerce entities are additionally required to show an evidence of the principle parameters and their relative significance in figuring out the rating of products or sellers on the platform. Though this provision forces e-commerce platforms to reveal the parameters to find out the precedence given to completely different sellers, it doesn’t prohibit them from prioritising one vendor or class of sellers over others.
Complexities come up from the E-commerce guidelines for Crypto-exchanges
With sure crypto-exchanges performing on a system of P2P exchanges whereas additionally endeavor trades on their very own platform, this presents two issues beneath the E-commerce Guidelines.
Firstly, though the E-commerce Guidelines impose numerous obligations on sellers resembling having prior written contracts, appointment of grievance officers, and so forth. such obligations would solely be legitimate for these sellers who’re promoting objects on the e-commerce platform as a part of their enterprise. People who commerce on P2P crypto exchanges as a pastime and never as a enterprise could not must abide by these situations for the reason that definition of the time period vendor or “product vendor” in part 2(37) of the Shopper Safety Act, 2019 is certified by means of the phrases “in the midst of enterprise” and “is concerned in putting such product for business goal”.
Secondly, deciphering the time period vendor solely as per the definition within the Shopper Safety Act, 2019 raises one other potential concern, viz. for the reason that E-commerce Guidelines don’t envisage any sellers apart from these outlined within the Act, one may argue that as per the E-commerce Guidelines, non-commercial sellers will not be allowed on e-commerce platforms in any respect. Such an interpretation may drive crypto exchanges to forestall their current account holders from promoting cryptocurrency on their P2P platforms.
This is able to be a particularly conservative interpretation of the E-commerce Guidelines and never solely impacts the enterprise mannequin of P2P crypto exchanges but additionally impacts e-commerce websites specialising in second hand items resembling OLX and Quikr. An alternate interpretation could possibly be that such e-commerce platforms don’t fall inside the definition of a market e-commerce entity however are thought of merely as “e-commerce entities” as outlined in Rule 3(b) of the E-commerce Guidelines. Whereas such an interpretation could appear affordable, it might imply that sure obligations of market e-commerce entities resembling making certain that the sellers give acceptable details about the merchandise, rating of sellers, and so forth. wouldn’t be relevant to those platforms. It could due to this fact be preferable if a clarification is issued concerning the standing and obligations of such e-commerce platforms in addition to the sellers on such platforms.
The way in which ahead
The gray zone that crypto-exchanges, particularly P2P exchanges, discover themselves in may create a scenario whereby they don’t seem to be topic to regulation that’s relevant throughout the spectrum of the e-commerce market. Given the precarious nature of crypto-assets as being unstable monetary devices, and with the market susceptible to schemes and scams, it’s crucial from a client safety standpoint that each one crypto-exchanges are held to the best attainable moral and regulatory requirements. It’s due to this fact crucial that policymakers look to make clear the standing of crypto-exchanges beneath the e-commerce guidelines and re-affirm their obligations to be honest, clear and act in the most effective curiosity of customers.
Aman Nair is a researcher and mission coordinator at Digital Futures Lab the place he focuses on Massive Tech, Gov Tech and Accountable AI. He was previously a coverage officer on the Centre for Web and Society the place he led the monetary applied sciences agenda. Vipul Kharbanda is a non-resident fellow at CIS, specializing in the fintech analysis agenda of the organisation.
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Notice: The article was up to date to mirror the correct authors’ bio on August 8, 2022 at 5.10 PM