NSE bans sale of digital gold. All you want to know

All that glitters may indeed be gold. But if you are looking to buy digital gold in India, you may want to tread cautiously. The National Stock Exchange has asked all its members to stop the sale of digital gold on their platforms by September 10. 

This decision came after the capital markets regulator, the Securities and Exchange Board of India (SEBI), said that the sale of digital gold is in contravention of the Securities Contracts (Regulation) Rules (SCRR) 1957. 

What really is ‘digital gold’?

‘Digital gold’ is essentially a fancy term for a mechanism that allows the virtual sale of the yellow metal via an online platform. A customer investing in gold virtually does not have to worry about its quality or purity or for that matter about storage or safe keeping. 

To be sure, the gold bought virtually is backed by physical metal, which is delivered at the end of a specified period, if not sold before then, or can be redeemed earlier. The mechanism also allows an investor to buy gold in bite-sized portions, as small as Rs 100, and hold it in fractional quantities, something that is not possible with physical gold. 

Which fintech companies allow people to buy or sell digital gold in India? 
Several well-known fintech companies allow people to transact in digital gold. Some marquee names include Groww, Upstoxx, Paytm Money, Motilal Oswal, HDFC Securities, Google Pay and PhonePe, to name some prominent ones. 

Who actually sells this gold?

While these fintech companies allow consumers to buy gold, they are basically middlemen. The gold is actually sold by three entities—AutmontGoldtech, MMTC-PAMP India, and Digital Gold India. These entities procure and store the physical gold in secure vaults. 
So, what is the regulatory hitch?

Digital gold falls in an undefined grey zone when it comes to regulation. This is why SEBI has deemed its sale as being in contravention of the SCRR 1957. 
Will all the fintech companies be equally impacted?

Not really. Broking platforms, which come under the umbrella of the NSE and are registered with SEBI, will be impacted, as the bourse’s diktat applies only to them. These include Paytm Money, Groww, Upstoxx, Motilal Oswal and HDFC Securities, just to name a few. 

Other, non-broking entities, like Google Pay and PhonePe will not be impacted, at least for now. Moreover, customers holding digital gold don’t have to worry, as their holdings will not be affected.

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