Fintech Platforms See Surge in Digital Gold Withdrawals After Sebi Warning
Fintech platforms offering digital gold have seen nearly a threefold surge in user withdrawals after the Securities and Exchange Board of India (Sebi) last week cautioned the public against dealing in such products, according to industry sources. Many also acknowledged that the advisory has put players in a bind.
In a statement on November 8, Sebi said digital gold products were outside the purview of the markets regulator. This meant regulators could not inspect fintech platforms’ physical vaults to verify the presence and purity of the gold, as these entities operated outside regulatory oversight.
“Platform users now have clarity that this is an unregulated product. There is no regulator auditing the inventory of physical gold and its purity, which can become a problem.”
Sebi added that digital or e-gold was being marketed as an alternative to physical gold but clarified:
“Such digital gold products are different from SEBI-regulated gold products,, as they are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of Sebi.”
Sebi warned that such products may entail significant risks, exposing investors to counterparty and operational risks.
Meanwhile, gold prices have softened after several weeks of gains, bringing into focus how platforms manage their vaults to cover user deposits.
Industry experts also raised concerns around inadequate KYC compliance, unclear transaction sources, and lack of safeguards. As a result, attention has shifted sharply to gold and silvergold ETFs, which are regulated and audited.
“Sebi conducts regular audits on entities offering gold or silver ETFs. If you buy digital gold now and sell it right after, you may fetch a lower price due to GST and commissions, unlike an ETF,” the founder noted.
Despite the concerns, fintechs argue they partner with authorized logistics providers and only act as technology enablers. Platforms like Jar, Gullak, Paytm, PhonePe, and others have made small-ticket digital gold investments widely accessible.
What Sebi Said
Digital gold products lie outside regulatory purview
Regulators cannot inspect vaults to verify physical gold and purity
Digital gold carries counterparty and operational risks
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