Digital Gold Not Under Sebi's Purview, Regulator Cautions Investors

The Securities and Exchange Board of India (Sebi) on November 8, 2024 issued a public caution, warning investors against dealing in digital or e-gold products offered through online platforms, saying such products do not fall under its regulatory purview, and as such. carry significant risks.

In its advisory, the capital markets regulator clarified that while it allows investments in gold through regulated avenues, such as gold exchange-traded funds (ETFs), electronic gold receipts (EGRs), and exchange-traded commodity derivatives, digital gold sold by unregulated entities is outside its oversight.

“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 and may expose investors to counterparty and operational risks,” Sebi said in its statement issued on November 8.

The regulator also cautioned that investor protection mechanisms available under the securities market framework would not apply to these digital gold or e-gold products.

In October 2021, Sebi had directed registered investment advisers to stop dealing in digital gold. 

In August 2021, the National Stock Exchange (NSE) had issued a similar directive to its members, including stockbrokers, asking them to discontinue the sale of digital gold on their platforms. According to the regulator, the said activity violates the Securities Contracts (Regulation) Rules, 1957.

Sebi’s Caution Comes Amid Rising Demand For Digital Gold

Sebi’s caution comes at a time when digital gold has gained massive attention among retail investors, particularly through payment platforms and fintech apps such as Paytm, Google Pay, and PhonePe. 

According to data from the National Payments Corporation of India (NPCI), the volume of digital gold purchases through the Unified Payments Interface (UPI) surged 95.90 per cent in 2025, from 50.93 million transactions in January to 99.77 million in August. The total value of digital gold bought through UPI also jumped 55.4 per cent to Rs 1,184 crore in August, as against Rs 761.6 crore in January.

What Risks Are Involved With Buying Digital Gold

Digital gold offers flexibility for small investors and can be easily bought or sold online. However, it carries several other risks, apart from the lack of regulatory oversight, that buyers should be aware of.

Lack of Transparency: A key concern with digital gold is the lack of transparency. Investors have no independent way to verify if the gold they buy is actually stored in vaults. They rely entirely on the company’s assurances about storage and security. Platforms offering digital gold assure that gold is stored in secure vaults. However, there is no independent audit or public disclosures to confirm this. This lack of transparency leaves room for possible misuse or fraud.

Cybersecurity Risks: It is also worth noting that digital gold is also exposed to cyber risks. In June 2025, hackers exploited a security flaw in a non-banking financial company’s (NBFC’s) mobile app, Aditya Birla Capital Digital mobile app, and stole digital gold worth about Rs 1.95 crore from more than 400 customer accounts.

Why Demand For Digital Gold Is Rising

Digital gold has lately seen a rise in demand because of its convenience, affordability, and liquidity. The option to buy small fractions online has attracted small-ticket investors who prefer to invest in gold, but do not want the hassles of storage, as it is in the case of physical gold.

The surge also comes at a time when gold prices have climbed more than 55 per cent in the last one year, led by uncertainty around global trade policies, geopolitical tensions, and continued central bank buying among other factors.