What Does SEBI Say About Digital Gold? A Complete Overview
Introduction: Why “Digital Gold” Became Popular in India
In the last few years, digital gold has become one of the most convenient ways for Indians to invest in gold without physically holding it. With just a few clicks, investors can buy as little as ₹10 worth of gold through apps like Paytm, PhonePe, Groww, and others.
But amid this convenience lies a big question — what is SEBI digital gold?
Since gold investment has traditionally been a regulated asset, investors want to know whether SEBI (Securities and Exchange Board of India) oversees these digital gold platforms or not.
Let’s dive into the truth behind SEBI digital gold and what it means for your money.
What Is “Digital Gold”?
Digital gold is a product offered by private fintech companies in partnership with gold trading firms. When you buy “digital gold,” the platform claims to purchase physical gold of equivalent value and store it in a secure vault on your behalf.
You can later sell this gold digitally or request home delivery of the physical metal.
However, digital gold is not the same as Gold ETFs or Sovereign Gold Bonds (SGBs) — which are regulated by SEBI and RBI respectively. That’s where the confusion begins.
SEBI’s Official Position on Digital Gold
SEBI has not yet brought digital gold under its regulatory framework.
In August 2021, SEBI issued a circular to all stock brokers and investment platforms stating that registered SEBI entities (like brokers and investment advisers) cannot sell digital gold products.
The reason? Digital gold is not classified as a “security” under the SEBI Act, 1992.
Hence, any sale or promotion of such unregulated investment products by SEBI-registered entities would violate the law.
Key takeaway: SEBI does not regulate digital gold, and any SEBI-registered intermediary cannot offer it directly.
Why SEBI Took This Step (SEBI digital gold)
SEBI’s move was aimed at protecting investors from potential risks. Here’s why:
1. No clear legal status: Digital gold doesn’t fall under the definition of securities, commodities, or deposits.
2. Platform risk: Investors rely completely on private companies to store and manage gold. If the company shuts down, investors could face losses.
3. No regulatory protection: SEBI can’t step in if something goes wrong, because digital gold is outside its jurisdiction.
4. Counter-party risk: Since the gold is stored in private vaults, investors depend on third-party custodians without transparent audit systems.
In short, SEBI wants investors to be aware that digital gold operates in a regulatory grey area.
SEBI’s Alternative: The Gold Exchange & EGR Framework
While SEBI doesn’t regulate digital gold today, it has taken steps to formalize gold trading through regulated channels.
In 2021, SEBI introduced a framework for Electronic Gold Receipts (EGRs) under the new Gold Exchange.
This framework allows investors to trade in gold receipts similar to how stocks are traded on exchanges.
EGRs are fully regulated by SEBI, ensuring transparency, standardization, and investor protection.
Difference between EGR and digital gold:
Feature Digital Gold Electronic Gold Receipt (EGR)
Regulated by None SEBI
Asset storage Private vaults SEBI-registered vault managers
Tradable on exchange ❌ No ✅ Yes
Legal protection ❌ None ✅ Full SEBI protection
Backed by Private entities SEBI-approved depositories
So, SEBI’s long-term goal seems to be shifting digital gold investors to EGR-based platforms under proper regulation.
Implications for Investors of SEBI digital gold
Here’s what the SEBI digital gold situation means for you:
1. Digital gold isn’t illegal, but it’s unregulated.
2. If you invest via a fintech app, ensure you understand who the custodian and refiner are.
3. Verify if the gold is 24K (999 purity) and stored in accredited vaults.
4. Check whether the platform is associated with government-approved partners like MMTC-PAMP or Augmont.
5. Read terms of redemption — many platforms have minimum redemption quantities or high delivery charges.
If you’re a long-term investor seeking safety and regulation, Gold ETFs or Sovereign Gold Bonds may be better choices.
The Risks SEBI Warns About (SEBI digital gold)
Since SEBI doesn’t monitor digital gold, the following risks exist:
No grievance redressal: SEBI can’t help if there’s fraud or mismanagement.
Storage and purity risk: You rely on private companies’ claims.
Liquidity issues: Selling back may involve delays or price spreads.
Tax ambiguity: Digital gold attracts 3% GST and capital gains similar to physical gold.
These risks highlight why SEBI prefers moving toward regulated EGR products rather than private digital gold.
Future of Digital Gold Under SEBI
The good news — SEBI digital gold and the Indian government are actively studying how to integrate digital gold into a regulated ecosystem.
Once the gold exchange and EGR system matures, we may see a transition from private digital gold to SEBI-regulated products.
Experts believe this will improve transparency, investor confidence, and liquidity in the gold investment market.
Until then, digital gold remains a convenient but unregulated investment choice.
Key Takeaways of SEBI digital gold
SEBI does not regulate digital gold — it only regulates Gold ETFs and EGRs.
Brokers registered with SEBI cannot sell digital gold directly.
Investors must perform due diligence before buying through private apps.
Safer alternatives: Gold ETFs, Sovereign Gold Bonds, and soon Electronic Gold Receipts (EGRs).
Conclusion of SEBI digital gold
Digital gold has transformed the way Indians invest in this timeless asset — but not all glitter is gold when regulation is missing.
The SEBI digital gold scenario teaches us that while innovation brings convenience, it also demands caution.
Until SEBI digital gold brings under its umbrella, investors should prioritize transparency, custodian trust, and safety over convenience.
Stay informed, invest wisely, and always check whether your investment is SEBI-regulated or not.