Different approaches to CFA and crypto advertising

The Singapore Ministry of Law introduced the Legal Profession (Amendment) Bill 2021 in November 2021, and has recently enacted provisions on conditional fee arrangements (CFA). CFAs are where a lawyer is paid legal fees only in certain circumstances. CFAs in Singapore, are limited to arbitration, certain Singapore International Commercial Court proceedings and related mediation. Many countries already use CFAs and Singapore is now in line with alternative fee arrangements available to litigants in those jurisdictions. The enactments contain various checks and balances and the way in which CFAs are to be used.

It is recognised that foreign lawyers represent many parties in a dispute and the CFA changes will apply to Singapore law practices, certain registered foreign lawyers and foreign law practices. In 2017, Singapore introduced the amended Civil Law Act and the Civil Law (Third-Party Funding) Regulations, 2017, making possible third party funding in international arbitration and related proceedings. CFAs will allow even greater financial flexibility for the disputing parties.

This change reflects Singapore’s constant efforts to innovate and maintain its stature as the preferred hub for dispute resolution. Indian litigants are becoming more familiar with third-party funding, but clarity would be helpful. CFAs in international arbitration should be permitted for India-seated arbitrations. This will put India on a par with Singapore and other jurisdictions and prevent misuse.

Singapore has taken a calibrated approach to regulating cryptocurrency exchanges. It has introduced a licensing framework, issuing only four exchange licences so far. The number of applicants has been much higher. The Monetary Authority of Singapore (MAS) has recently released a set of guidelines on the provision of digital payment token services to the public. MAS has emphasised the high risks involved in trading in cryptocurrencies and has forbidden providers of digital payment token services advertising cryptocurrency trading through various media, including public transport, public transport venues, general websites and social media platforms. Social media includes the use of influencers. Marketing or advertising is only permitted through corporate websites, mobile applications and official social media accounts. This is to protect the public from the risks related to financial products that may not be understood clearly and to help individuals carry out due diligence before investing in cryptocurrencies.

The UK and Spain have regulated the advertising of cryptocurrency investments. Spain requires advertisements for crypto-assets to be clear, balanced, fair and to explain the risks to the public. India has also followed suit and The Advertising Standards Council of India has recently set standards for advertisements related to cryptos in the country, effective 1 April. Due to this, crypto exchanges and other firms running ads around “virtual digital assets” will have to carry a disclaimer warning viewers that these assets can be “highly risky”.

While the much-awaited Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is waiting to be tabled in parliament, these guidelines on advertising come at the right time.

Given that the government wants further discussions to build consensus on regulatory guidelines, the Singapore approach may perhaps be incorporated in the proposed law. Singapore encourages innovation in technology, including blockchain and cryptocurrencies, progressively regulating them through the right safeguards, with the focus on consumer protection. As in many jurisdictions, cryptocurrencies are in a grey area in India. It is difficult to know whether they are goods, securities or currency. Most likely they will be categorised as goods, services or securities. Currencies are understood to be fiat currencies.

Legislation on consumer and securities activities incorporates consumer and investor protection. With some hints that naturally come from the Union Budget, consequent overlap and the resulting confusion must be avoided. India should consider ways it can leverage the ever-growing cryptocurrency market through a well-thought out framework for the regulation of the industry. This will significantly improve the financial infrastructure, reduce risk and fuel innovation.

Vivek Kathpalia is the managing director and CEO of the Singapore office, and Dipti Bedi is a partner at Cyril Amarchand Mangaldas.