SEBI’s Warning on Digital Gold: What Investors Need to Know

The Securities and Exchange Board of India (SEBI) recently issued a public advisory cautioning people against dealing in “digital gold” or “e-gold” products. The circular highlights a growing concern: although digital gold is widely available through many apps and online platforms, it does not fall under SEBI’s regulatory framework.

This means digital gold is not recognised as a security, nor does it qualify as a regulated commodity derivative. In simple terms, SEBI cannot protect you if something goes wrong, even if you purchased it through a popular or trusted platform.

Why SEBI Issued This Warning

Digital gold has become extremely popular over the last few years because it offers convenience: you can buy small quantities, transact instantly, and avoid the challenges of storing physical gold.

But SEBI has flagged several major risks:

1. No Regulatory Oversight

Digital gold is not supervised by any financial regulator. If a platform fails, shuts down, or mismanages the underlying gold, investors have very limited legal recourse.

2. Misleading Marketing

Some platforms market digital gold in a way that suggests it is as safe and regulated as mutual funds or ETFs. In reality, it operates in a regulatory grey zone, which makes these claims misleading.

3. Lack of Verified Backing

You may assume the platform actually holds physical gold on your behalf - but there is no mandated independent audit or statutory framework ensuring the gold exists, is stored safely, or is allocated in your name.

4. Counterparty Risk

Your investment depends entirely on a private entity honouring its promise. If the vaulting partner, app, or fintech collapses, your claim may not stand in court the way regulated securities do.

5. Delivery and Exit Risks

Converting digital gold to physical gold often involves high costs, delivery limitations or delays. Liquidating digital gold may also require selling it back to the same provider, narrowing your options.

Why Digital Gold Can Be Risky for Investors

Here’s a simple breakdown of why digital gold may not be as safe as it appears:

• It relies heavily on the integrity and operational strength of the provider.
• There is no central authority ensuring fair pricing or safeguarding your holdings.
• You may not actually own gold in your name - only a claim against the company.
• If the company faces financial trouble, your gold may not exist or may not be retrievable.
• Dispute resolution is unclear because it is not regulated like securities or commodities.

The bottom line: digital gold offers convenience, but with significant legal and operational uncertainty.

Safer, Regulated Ways to Get Gold Exposure

If you want to invest in gold without dealing with unregulated platforms, there are two well-established, SEBI-regulated options:

1. Gold ETFs (Exchange-Traded Funds)

Gold ETFs track the price of physical gold and trade on stock exchanges. They offer:

• Full regulatory oversight
• High transparency
• Ability to buy/sell anytime through your Demat account
• No storage or purity concerns

2. Gold Mutual Funds

These mutual funds invest in gold ETFs and are suitable for investors who don’t have a Demat account. They provide:

• Professional fund management
• SIP options
• Regulated structure
• Convenient access to gold exposure

Both options allow you to participate in gold price movements without holding physical gold or depending on unregulated digital products.

Final Word

SEBI’s warning is an important signal for investors. Digital gold may look modern and convenient, but that convenience comes with hidden risks. Without regulatory protection, your investment depends entirely on private intermediaries and their operational reliability.

If you want to include gold as part of your portfolio, whether for diversification, hedging or long-term stability - Gold ETFs and gold mutual funds offer much safer, transparent and regulated exposure.

They give you the benefit of gold without the uncertainty of digital gold, and without the hassle of buying, storing or managing the metal yourself.