Sebi Cautions Investors on Digital Gold: Convenience Comes With Hidden Risks
The Securities and Exchange Board of India (Sebi) has issued a fresh warning to the general public against investing in Digital Gold or E-Gold products, underscoring that these instruments operate outside any regulatory oversight.
While such products have existed for several years, the sharp rise in gold prices, combined with the ease of owning gold digitally through apps and fintech platforms, has triggered a surge in their popularity over the past year.
Sebi observed that these offerings are often marketed as investment alternatives to physical gold, but remain unregulated and carry significant risks.
What Is Digital Gold?
Digital gold refers to purchasing gold without physically possessing the metal. The price of digital gold mirrors that of physical gold, and transactions are typically executed using blockchain-based systems that allow users to buy, sell, and store gold electronically.
The appeal lies in its accessibility — investors can start small, avoid storage hassles, and liquidate holdings instantly in emergencies. Many platforms also allow investors to convert their holdings into physical gold in the form of coins, bars, or jewellery.
Over the last year, MCX spot gold prices have soared nearly 59 per cent, rising from ₹76,577 per 10 gm to ₹1.22 lakh per 10 gm, prompting many investors to shift toward digital formats.
Sebi’s Cautionary Note
Sebi stated that several online platforms and jewellers are offering digital-gold products under the guise of convenience and flexibility. However, these are neither notified as securities nor regulated as commodity derivatives, and therefore fall completely outside the regulator’s jurisdiction.
“None of the investor-protection mechanisms under securities-market purview shall be available for investments in such digital-gold or e-gold products,”
This means that if an issuer defaults or a platform collapses, investors have no legal recourse or regulatory protection.
Why It’s Considered Risky
According to Sebi, digital gold operates entirely outside the regulatory framework, leaving investors vulnerable to counterparty and operational risks.
Counterparty risk arises if a platform or its vaulting partner fails to deliver the gold or ceases operations.
Operational risk involves possible system errors, fraud, or inaccurate record-keeping of ownership.
In contrast, Sebi-regulated instruments such as Gold Exchange-Traded Funds (ETFs) and Exchange-Traded Commodity Derivatives require strict custody norms, independent audits, and demat-based holding, ensuring transparency and investor protection.
A Growing but Unchecked Trend
Unlike ETFs, digital gold does not require a demat account or margin deposits, which explains its mass adoption. Many jewellers — both organised and unorganised — are now offering investment options in digital gold, further fuelling demand.
However, the absence of regulatory safeguards makes it imperative for investors to exercise caution, verify the authenticity of custodians and audit reports, and prioritise regulated investment avenues for long-term wealth preservation.
The Bottom Line
Digital gold may offer convenience, but it comes without the trust and protection of regulatory oversight. As Sebi reiterates, investors must look toward regulated products like Gold ETFs, Electronic Gold Receipts (EGRs), or exchange-traded derivatives that combine transparency, liquidity, and safety.
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