Investors urged to choose ETFs and Electronic Gold Receipts instead of digital gold
The Securities and Exchange Board of India (Sebi) has cautioned investors against putting money into digital or e-gold products, warning that such instruments lie outside the regulator’s jurisdiction and carry significant financial and operational risks.
The market regulator issued the advisory on Saturday, after observing that several online platforms and fintech firms were promoting “digital gold” as a safe and convenient alternative to physical gold investment.
“Such digital gold products are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of Sebi,” the regulator said in an official statement.
Digital gold not the same as Sebi-regulated instruments
Sebi clarified that digital gold products differ from Sebi-regulated gold investment options and that investor protection mechanisms under its framework do not apply to these unregulated schemes.
“These products may entail significant risks for investors, including counterparty and operational risks,” Sebi added, noting that buyers could lose money in the event of disputes, fraud, or company failures, since no formal oversight or grievance redressal mechanism exists for such offerings.
Sebi-regulated alternatives: ETFs, EGRs, and derivatives
For investors seeking exposure to gold, Sebi advised opting for regulated investment vehicles such as:
• Gold Exchange-Traded Funds (ETFs) offered by mutual funds
• Exchange-traded commodity derivative contracts
• Electronic Gold Receipts (EGRs) that can be traded on recognized stock exchanges
These instruments are supervised by Sebi and must comply with investor protection norms, ensuring transparency, accountability, and secure transaction channels through registered intermediaries.
Rise of unregulated online gold schemes
Digital gold schemes have become popular among retail investors in recent years, often marketed by fintech companies and jewellers as fractional investment options that allow buyers to purchase small quantities of gold digitally.
However, financial experts have long warned that lack of regulation, unclear ownership structures, and storage concerns make such products risky investment vehicles, particularly for small investors seeking safe-haven assets.
Sebi’s warning follows similar alerts issued earlier by the Reserve Bank of India (RBI) and commodity market experts, who emphasized that only instruments falling within a clear regulatory framework can ensure investor safety and market integrity.
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