Sebi Cautions Investors: Avoid Unregulated Digital Gold on Fintech Platforms
The Securities and Exchange Board of India (Sebi) has issued a strong warning to investors against buying digital gold through fintech apps and online platforms, clarifying that such products do not fall under any Sebi-regulated framework.
The regulator said these offerings “may entail significant counterparty and operational risks,” adding that none of the investor-protection mechanisms available under securities law would apply. Instead, Sebi encouraged investors to consider regulated gold avenues such as Exchange-Traded Funds (ETFs), Exchange-Traded Commodity Derivatives, and Electronic Gold Receipts (EGRs)—instruments that ensure compliance, transparency, and physical backing.
What Investors Should Do Now
Investors are advised not to panic or rush to redeem but to review where and how their digital gold is held, said Aditya Agarwal, co-founder of Wealthy.in.
He clarified that Sebi’s advisory does not imply every digital-gold platform is unsafe, but it differentiates between regulated and unregulated offerings.
“When a product lies outside Sebi’s framework, its standard safeguards and investor-protection mechanisms don’t apply,”
He recommended checking whether a platform:
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Publishes independent third-party audit reports or vault certificates,
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Uses reputed custodians such as Brink’s or Sequel Logistics, and
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Maintains transparent redemption and storage terms.
“If a platform lacks transparency or independent verification, consider redeeming or shifting to a more credible provider. Otherwise, continue holding but stay alert to regulatory updates,”
Understanding the Risks
Convenience should never override regulatory safety in wealth creation, said Ranjit Jha (CEO), managing director and chief executive officer at Rurash Financials.
“Sebi’s warning reminds investors of the significant counterparty risk involved in unregulated products,”
“In simple terms, counterparty risk is the danger that a digital-gold app or its vaulting partner could default or collapse, leaving investors unable to redeem holdings. Operational risk refers to system failures or fraud that could erase or manipulate ownership records. Since these products are unregulated, investors have no grievance-redressal mechanism if things go wrong.”
Why Sebi-Regulated Gold Products Are Safer
According to Kinjal Shah, chartered accountant and vice president at the Bombay Chartered Accountants’ Society, Gold ETFs and EGRs are regulated under SEBI, backed by physical gold held in independent vaults, with mandatory audits and clear redemption protocols.
“Digital gold, by contrast, operates outside any supervision, with no assurance that the gold actually exists or will be delivered,”
Shah added that while digital gold attracts 3 percent GST on purchase, ETFs and EGRs avoid that cost, making them more efficient and liquid—since they can be traded on stock exchanges, unlike digital gold that must be sold back to the issuing platform.
How Much Exposure Is Safe?
Experts recommend that gold comprise 10–15 percent of a portfolio, primarily through Sebi-regulated instruments.
While digital gold may offer convenience for small-ticket investors, it remains a high-risk, unregulated product.
“The marginal convenience of an app doesn’t justify the absence of regulatory protection,” Shah emphasised, urging investors to gradually shift toward ETFs or EGRs for safety, transparency, and liquidity.
The Bottom Line
Sebi’s latest caution underscores a larger theme—the need for investor awareness in the digital wealth era. Convenience and innovation should be matched by compliance and credibility, ensuring long-term trust in India’s wealth ecosystem.
For deeper insights into how Wealthtech innovation, advisory excellence, and regulatory transparency are shaping India’s financial-services future, explore perspectives from Ranjit Jha (CEO)—a pioneer in bridging technology with trust in wealth management.
To discover how Rurash Financials empowers clients through personalized investment strategies, AIF access, and digital wealth solutions, visit the official website.