For thousands of investors who plan to invest in gold but are held up by the absence of upfront capital, digital gold seems like a resolute way out. From Rs 10 and above, users are able to seemingly satisfy their urge to invest with these puny purchases. But behind the convenience lies a significant regulatory gap that could lead to a possible snag in your digital gold buying experience and fetching returns.
The Securities and Exchange Board of India (SEBI) has warned that these products, though widely marketed, operate outside their supervision and may put investors at risk.
In a press release that was issued on Saturday, it has come to its notice that certain online platforms that are offering digital gold or e-gold products to investors. The regulator clarified that these do not fall under the securities market framework and hence operate outside SEBI’s purview.
“Such digital gold products are neither notified as securities nor regulated as commodity derivatives.”
The regulator further emphasised that investors purchasing such products will not be covered by any investor protection mechanisms available in SEBI-regulated markets. This means that in case of fraud, insolvency, or disputes, investors will have no way out through the securities market system.
Digital gold continues to attract wide participation, particularly among young and first-time investors. The low entry threshold is what attracts first-time investors. The idea of such investments is simple: investors can purchase gold digitally, while an equivalent quantity of physical gold will be stored in a vault by the platform provider. Buyers can later sell it or have it delivered as coins or bars.
Most providers of gold loans use popular consumer-based platforms, including Google Pay, Paytm, PhonePe, Amazon Pay, Groww, and Jio Gold, to retail digital gold. The addition of such brand names further gives the business credibility. In the absence of a safety net that has been highlighted by SEBI, regulated instruments like gold exchange-traded funds, electronic gold receipts, and exchange-traded commodity derivatives—which are backed by regulatory oversight—can be purchased through SEBI-registered intermediaries.
While e-gold seems convenient, it is not risk-free. Even safe gold saving schemes run by jewellers have faced scrutiny due to the lack of regulatory safeguards. SEBI recommends ETFs or EGRs, where transparency, liquidity, and investor protection frameworks are firmly in place.
