The market regulator, the Securities and Exchange Board of India (SEBI), has issued a stringent circular cautioning investors against dealing in “Digital Gold” or “E-Gold” products offered through various online platforms. SEBI explicitly stated that these offerings are entirely outside its regulatory purview, meaning the digital gold being sold through these platforms is not subject to the safeguards designed for the securities market.
In the circular, the regulator emphasized the critical distinction between these products and those it regulates: “Caution to public regarding dealing in ‘Digital Gold’, In this context, it is informed that such digital gold products are different from SEBI regulated gold products as they are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of SEBI”.
The regulator’s warning stems from significant investor risks associated with these unregulated offerings. Such digital gold products “may entail significant risks for investors and may expose investors to counter party and operational risks”. Crucially, the circular states that “none of the investor protection mechanisms under securities market purview shall be available for investments in such Digital Gold/ E-Gold products”.
SEBI has observed that these digital gold products are being marketed as a straightforward alternative to investing in physical gold. However, the lack of regulation means that investors face risks related to the solvency of the platform operator, the security of the underlying physical gold (if any), and the fairness of the pricing mechanism—risks that are typically mitigated by SEBI’s robust oversight framework.
For investors seeking to include gold in their portfolios, SEBI clearly outlines the regulated and secure options available. The regulator has enabled investments in gold and gold-related instruments through various SEBI-regulated gold products. These include Exchange Traded Commodity Derivative Contracts, Gold Exchange Traded Funds (ETFs) offered by Mutual Funds, and Electronic Gold Receipts (EGRs) tradeable on stock exchanges.
Investments in these regulated products can only be made through SEBI-registered intermediaries and are subject to the prescribed regulatory framework. By offering this clarity, SEBI is guiding investors toward safer, compliant, and well-governed avenues for gold investment, while simultaneously isolating the risks posed by the burgeoning but unregulated digital gold market.
