SEBI Issues Stern Public Caution: Digital Gold Investments Unregulated, Lack Investor Protection

SEBI Issues Stern Public Caution: Digital Gold Investments Unregulated, Lack Investor Protection

Shrikant Soman

The Securities and Exchange Board of India (SEBI), the market regulator, has issued a strong public advisory against investing in unregulated “Digital Gold” or “E-Gold” products offered by various online platforms.

In its Press Release No. 70/2025, dated November 08, 2025, titled “Caution to public regarding dealing in ‘Digital Gold’,” SEBI clarified that these products operate entirely outside its regulatory ambit, exposing investors to significant risks. The advisory comes at a time of heightened investor interest in the yellow metal, with global gold prices near all-time highs.

The Status of Digital Gold: Outside Regulatory Purview

SEBI has made it unequivocally clear that digital gold offerings—often marketed as a convenient, fractional alternative to physical gold—are fundamentally different from any product regulated under the securities market laws.

The key regulatory distinction highlighted by the market regulator is that these products are "neither notified as securities nor regulated as commodity derivatives." Consequently, they fall completely outside SEBI's jurisdiction and oversight.

This means that while established names in the jewellery and fintech sectors may facilitate these transactions, the product itself lacks the stringent governance, transparency, and surveillance mechanisms mandated for financial market instruments.

Significant Investor Risks Identified

The core danger for the public, as emphasized in the advisory, lies in the complete absence of regulatory safeguards. SEBI has explicitly warned:

 * No Investor Protection: “None of the investor protection mechanisms under securities market purview shall be available” for investments in digital gold. In case of any complaint, fraud, or operational failure, investors will have no recourse to the grievance redressal mechanisms established by SEBI.

 * Counterparty and Operational Risks: The products “may entail significant risks for investors and may expose investors to counterparty and operational risks.” These risks stem from the possibility of the underlying vaulting partner or the digital platform provider defaulting or facing operational issues, leading to potential loss of investment with no legal safety net.

SEBI-Regulated Avenues for Gold Investment

To ensure investor safety, the regulator urged the public to route their gold investments exclusively through SEBI-regulated instruments offered by registered intermediaries. These products provide market transparency, regulatory oversight, and legal protection:

Regulated Gold Investment Avenue

• Gold Exchange Traded Funds (ETFs) - Units representing physical gold, traded on stock exchanges and backed by mutual funds.

• Electronic Gold Receipts (EGRs) - Digital receipts tradable on stock exchanges, representing ownership of physical gold held in accredited vaults.

• Exchange Traded Commodity Derivative Contracts - Regulated contracts used to take exposure to gold prices.

Investments made through these regulated channels are subject to the prescribed legal framework, ensuring transparency and accountability.

Final Takeaway

SEBI’s advisory serves as a critical reminder that convenience should not overshadow due diligence. Investors must verify that the products and the intermediaries they deal with are regulated by SEBI before committing any funds. Choosing regulated pathways, as outlined by the central market authority, is essential to protect capital and avail legal protection in the dynamic gold market.

How Digital Gold Currently Operates

Digital gold products are being sold by various entities, often including some of the biggest names in the jewellery business in India, as an alternative to physical gold.

For consumers, the process is often marketed as simple:

•  A buyer logs in to the website or app and can typically purchase gold starting from as little as ₹100.

•  The seller provides a receipt of the purchase, detailing the amount and the grammage of gold acquired.

•  When needed, the buyer can surrender the receipt to either get the equivalent cash value of the gold or exchange it for a piece of jewellery, depending on the terms offered by the seller.

However, SEBI's warning makes it clear that the apparent convenience and association with large, reputable jewellery brands or online platforms do not translate into regulatory safety or investor protection. The transaction and the underlying gold storage remain outside the formal securities market regulatory oversight.

A Timely Warning

The regulator’s move is a timely intervention to protect the public, especially considering the recent surge in gold buying interest driven by high global prices. The warning strongly advises investors to exercise caution and choose only SEBI-regulated instruments when seeking exposure to gold, ensuring their investments are covered by robust regulatory safeguards and investor protection mechanisms.

#SEBI #DigitalGold #SEBIwarning #GoldInvestments #shrikantsoman -----------------------------------

Source

SEBI Press Release No. 70/2025, dated November 08, 2025, titled “Caution to public regarding dealing in ‘Digital Gold’