The Securities and Exchange Board of India (Sebi) has cautioned investors against putting money into unregulated “digital gold” or “e-gold” products offered by various online platforms, warning that such investments fall outside its regulatory framework and carry significant risks.
Digital gold is a method of investing in pure 24-carat gold without holding any physical bar or coin. Investors can invest in a fractional amount of gold starting at ₹1 and can either sell their holdings or convert them into physical gold as per their requirements, with round-the-clock access and a digital interface, making it appealing to micro-savers and young investors.
Unlike physical gold, which has to be stored safely, or gold ETFs and mutual fund, which require demat accounts and KYC compliance respectively, these can be invested into using digital platforms such as Google Pay, PhonePe, Paytm and also from retail jewellers like Tanishq, Kalyan Jewellers, PC Jewellers and directly from dedicated platforms such as MMTC-PAMP, SafeGold, etc.
However, digital gold is not regulated by Sebi, like ETFs, nor by the RBI, like sovereign gold bonds. There are also custody risk concerns and investors may not have information on whether the physical gold is properly allocated and audited.
Riskier alternative
In a statement on Saturday, the market regulator said it had observed several digital or online platforms promoting digital gold as an alternative to physical gold. However, Sebi clarified that these products are neither notified as securities nor regulated as commodity derivatives and, therefore, fall entirely outside its jurisdiction.
“Such digital gold products may entail significant risks for investors and may expose them to counterparty and operational risks,” Sebi said, adding that none of the investor protection mechanisms available under the securities market framework apply to these schemes.
The regulator reminded investors that gold-related investments can be made safely through Sebi-regulated avenues such as ETFs offered by mutual funds, exchange-traded commodity derivative contracts and Electronic Gold Receipts (EGRs) traded on stock exchanges. Sebi urged investors to use only its registered intermediaries and to remain cautious of entities or platforms that are not under any regulatory oversight.
The capital market regulator’s observations come at a time when there is a surge in interest in digital gold purchases amid record prices of the yellow metal. This is evident from NPCI’s data on a surge in purchases of digital gold through UPI.
In September, ₹1410.18 crore worth of digital gold was purchased using UPI through 103.19 million transactions, which was only ₹761.6 crore in January through 50.93 million transactions. Price of pure gold, which was hovering around ₹76,350 per 10 gram in January, had crossed the ₹1,13,700 mark towards the end of September in Calcutta.