Introduction
Recently, SEBI issued a public caution about “digital gold” sold on apps and websites. In short: most digital-gold products are outside SEBI’s regulatory ambit, so you don’t get the protections you have with regulated products
What exactly is “digital gold”?
It’s an online way to buy tiny slices of gold. Platforms say they hold equivalent physical gold in a vault and let you sell or request delivery later. The catch: these offerings are not SEBI-recognised securities, so they don’t sit under SEBI’s rulebook and hence SEBI has issued the warning for the investors in digital gold.
Why did SEBI caution investors?
Because many of these platforms are unregulated, which introduces real risks:
- Counterparty risk: if the platform or vault partner fails, your claim may be weak.
- Operational risk: record-keeping, audits, delivery timelines, and dispute resolution can be inconsistent.
- Regulatory risk: There is no recourse to investor in digital gold as its not regulated by SEBI and SEBI will not be able to provide any assistance in case of any default by counterparty.
SEBI points investors toward regulated avenues instead (explained below).
Safer ways to own gold (regulated or government-issued)
Gold ETF (exchange-traded fund)
- What it is: A mutual fund that tracks gold; you buy/sell units on the exchange via your demat.
- Why it’s safer: SEBI-regulated fund structure with transparent NAVs.
- Watch-outs: Expense ratio and bid-ask spreads.
Electronic Gold Receipts (EGR)
- What it is: Exchange-traded receipts backed by vaulted gold; part of SEBI’s Gold Exchange framework.
- Why it’s safer: Clear market infrastructure, registered vault managers, and exchange-led price discovery.
- Watch-outs: Liquidity can vary by series; check your broker’s EGR access and fees.
Sovereign Gold Bonds (SGBs) – legacy/secondary market only
- Status now: New primary tranches are not currently available.
- What you can do: You may buy existing SGBs on the secondary market (stock exchanges) if liquidity/price suit you.
- Notes: Interest is taxable. Capital-gains treatment depends on how you acquired the bond and how you exit—check the latest rules before transacting.
A quick reality check
SEBI’s core message is simple: gold isn’t the problem; platform/regulatory risk is. If your gold allocation is meant to be a hedge and long-term diversifier, prefer regulated rails (Gold ETF/EGR) over unregulated platform products. If you already hold digital gold, decide calmly whether to keep, trim, or switch—then execute in small, planned steps.
Should you exit digital gold immediately?
No need to panic. Do the hygiene checks above. If you want to reduce platform risk, move gradually into SEBI-regulated (ETF/EGR) routes. If you prefer a fixed-term, bond-like exposure, you can look for existing SGBs on the secondary market, but evaluate liquidity/price and confirm tax treatment first.
At-a-glance: Digital Gold vs ETF vs EGR
| Feature | Digital Gold (platform) | Gold ETF | EGR | SGB (secondary) |
|---|---|---|---|---|
| Regulator | None specific | SEBI (MF regs) | SEBI (Gold Exchange/EGR) | RBI/GoI scheme (traded on exchange) |
| Holding form | Platform ledger; vault partner claims | Units in demat | Receipts in demat | Bond units in demat/cert |
| Liquidity | Platform buy/sell only | Exchange trading | Exchange trading | Exchange trading (varies by series) |
| Costs | Spreads, storage/handling | Expense ratio + spreads | Exchange/broker fees | Spreads; brokerage; possible premium/discount |
| Key risks | Counterparty/operational/regulatory | Market/liquidity | Series-level liquidity | Price gaps vs reference value; liquidity pockets |
Bottom line: Gold can still play a smart, steady role in your portfolio—the risk sits with where you hold it. If your exposure lives on unregulated platforms, shift calmly toward regulated rails like ETFs or EGRs, in a few planned steps. Keep records, rebalance on a schedule, and let rules and not headlines—drive your decisions.
