SEBI’s Warning on Digital Gold: What It Means and How Investors Should Respond

India’s fast-growing digital gold market is once again under the spotlight after the Securities and Exchange Board of India (SEBI) issued a cautionary note. The regulator clarified that digital gold sold through fintech apps, payment gateways, and jewelry brands does not fall under its supervision — sparking concern among thousands of investors who have parked their money in these platforms.

SEBI Clarifies: Digital Gold Is Not a Regulated Product

In its latest circular, SEBI stated that digital gold is neither a security nor a commodity derivative, meaning it is not covered under any existing regulatory framework. This leaves a crucial gap in investor protection.

If a platform suddenly shuts down or fails to maintain enough physical gold reserves, investors may struggle to recover their money. The regulator emphasized that such products are offered outside the scope of government-backed laws, so any potential fraud or mismanagement would not be officially compensated.

Safer Alternatives Exist — Gold ETFs and EGRs

SEBI has advised investors to consider regulated gold investment options, such as:

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  Gold Exchange-Traded Funds (ETFs)

  
  


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  Electronic Gold Receipts (EGRs)

  
  


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  Gold-linked commodity derivatives traded on stock exchanges

  
  

These instruments are governed by SEBI’s regulations and provide transparency, physical backing, and audit control, making them far safer than private digital gold offerings.

What Should Digital Gold Investors Do Now?

According to experts, SEBI’s warning is not a directive to sell immediately but rather a call to re-evaluate your risk exposure. Investors should check whether their digital gold platform maintains sufficient physical gold, follows transparent pricing practices, and stores gold with credible vaulting agencies.

Saurabh Jain, Co-founder and CEO of Stable Money, said,

“Any investment that looks easy but lacks regulation can turn risky. Digital gold platforms must maintain the same level of transparency as banks or mutual funds to build investor confidence.”

Jain added that Gold ETFs or Gold Mutual Funds are better alternatives since they are audited, regulated, and offer clear price visibility.

Industry Experts Expect Stricter Regulations Ahead

Experts believe SEBI’s advisory hints at an upcoming regulatory overhaul. Aishwarya Gupta, Global Head of Payments at Polygon Labs, noted that digital gold has existed in a “grey zone” for nearly a decade — it’s not categorized as a security, deposit, or derivative.

Gupta explained that India’s ₹10,000-crore digital gold market now includes hybrid investment products that mix gold with SIPs, digital tokens, or blockchain elements, which complicates oversight.

“India is working toward a regulated framework for tokenized assets,” Gupta said. “Closing the grey area is the first step. Investors should review their portfolios and adjust accordingly.”

What Is Digital Gold?

Digital gold allows users to buy, sell, or hold gold online via fintech apps or web platforms, often with investments as low as ₹10. The equivalent amount of physical gold is stored in a vault by a partner company, and buyers receive a digital certificate or record of ownership.

This eliminates storage and purity concerns and offers easy liquidity. However, the lack of regulation makes it a trust-based system, where the credibility of the platform is the biggest risk factor.

Expert Take: Proceed with Caution

Financial advisors agree that while digital gold offers convenience and accessibility, it should not form a large part of one’s portfolio. Instead, investors should:

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   Verify platform credentials and vaulting arrangements.

   
   


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   Diversify by holding a portion in Gold ETFs or SGBs (Sovereign Gold Bonds).

   
   


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   Monitor future regulatory updates from SEBI or the Reserve Bank of India.

   
   

Bottom Line

SEBI’s recent statement isn’t about creating panic but about ensuring informed investment decisions. If you already hold digital gold, don’t rush to liquidate — instead, evaluate your provider’s credibility and consider shifting to regulated gold options for long-term safety.

As the government moves toward formalizing the tokenized and digital asset ecosystem, the message for investors is clear:

Stay informed, stay diversified, and never ignore the fine print.

Disclaimer: The information provided here is for educational purposes only. Investments in financial markets are subject to risk. Always consult a certified financial advisor before making investment decisions.