MC Exclusive| Chased away by SEBI norms, finfluencers find refuge in highly lucrative crypto market
2025-01-13
Category: None

Finfluencers, restricted by SEBI's strictures on the referral programme, are now making big money promoting crypto-trading platforms, earning even double what they used to when advertising SEBI-regulated products.
The concern is that these crypto platforms, which offer high-risk, high-reward opportunities, are loosely regulated with weak investor-protection measures.
According to market insiders, a mid-level influencer can make upto Rs 10 lakh a month from partnering with these platforms, and make an additional income from generous commissions, which can go up to 80 percent of the transaction charges earned by the platform.SEBI directions
Finfluencers made the switch from brokerages to crypto platforms after the capital markets regulator placed strictures on referral programmes.
Also read: SEBI proposes doubling additional-disclosure threshold for FPIs having Rs 25,000-cr exposure
Over the last year, the Securities and Exchange Board of India (SEBI) announced restrictions on association of SEBI-registered entities with third party entities such as finfluencers. Stock exchanges have announced that any entity referring clients to brokerages need to be appointed as an authorised person (AP) of the brokerages. An entity can be an AP only of one brokerage, which means any finfluencer would need be tied to one brokerage as opposed to their earlier transactions with multiple brokerages.
These measures effectively brought an end to a large part of the influencers income, which used to come from a share of the brokerage generated through their referrals.
Besides SEBI's interventions, according to an influencer now promoting crypto platforms, the US elections were also a turning point.
After Donald Trump's victory in the November 2024 elections, there is a lot more interest and confidence in crypto currencies, particularly since Trump's close circle includes strong crypto-advocates such as Elon Musk.
Crypto regulations
Meanwhile, cryptocurrencies occupy a curious, liminal space in the regulated landscape.
While crypto currencies are partially regulated, intermediaries dealing with them are required to be registered with the Financial Intelligence Unit India (FIU) India and follow anti-money laundering laws, but they are investments that the Reserve Bank of India has warned against. The central bank has repeatedly issued notices cautioning people from dealing in crypto currency and the former RBI Governor Shaktikanta Das has said that cryptocurrencies have no underlying value "not even (of) a tulip". Das was making a reference to the Tulip Mania that gripped Holland in the 17th Century and sank many people's fortunes.
Recently, a petition was heard in the Delhi High Court from users of the cryptocurrency exchange BitBNS, with the users claiming to have lost money while transacting on the platform. The court has sought a response from the capital markets regulator and the central bank in the matter.
It is in this uncertain climate that these platforms are being promoted and most often in good faith by several influencers, who keep repeating that they are dealing in a "legal" and "taxed" business.
There is also the highly-lucrative side of the business.
While one insider, who promotes such a platform, said that a mid-level influencer can hope to make Rs 5 lakh to Rs 10 lakh a month, another said that the commissions offered by these platforms can fall anywhere between 40 percent and 80 percent of the trade value.
A person who was approached by several platforms over the past few months said that such platforms are able to pay so highly because of the value of the trades that are done through them, which is made possible by the high leverage these platforms offer. Many platforms offer leverage of upto 100x; for example, with Rs 100, you can take a Rs 10,000 value trade, which translates to a higher transaction fee.
These are high-risk trades for an investor. For example, if you get an exposure of Rs 5 crore by depositing Rs 5 lakh, you can double your money if the value of the coin moves in your favour by as much as 1 percent. But, you can lose the entire capital, if the value of the coin moves against your bet by the same measure.
A brokerage head said that, with these charges, influencers would be earning more than double of what they would have from stock brokers. He said, "Regulators must hold all online platforms that sell investment products to high compliance standards, and not just the ones under the capital-market regulator's purview. Otherwise investors will just move to these higher-risk platforms".
Meanwhile, users of platforms such as BitBNS have to approach various regulatory agencies to be able to withdraw what they believe are their rightful earnings.The petitions with the Delhi High Court have alleged financial fraud and mismanagement of funds.