The Allure of Digital Gold
Digital gold offers a modern alternative to buying physical gold. Instead of handling coins or jewellery, you can purchase 24K gold online in fractional amounts, sometimes for as little as one rupee. This gold is then supposedly stored in insured vaults
by the seller on your behalf. Companies like MMTC-PAMP, Augmont, and SafeGold are major players in this space, often partnering with popular payment apps. The convenience is undeniable, but this ease of access has also attracted scrutiny from financial watchdogs, who are concerned about the lack of a formal regulatory structure.
SEBI's Stance: A Clear Warning
The Securities and Exchange Board of India (SEBI) has been unambiguous in its position. In advisories, most notably one issued in November 2025, SEBI clarified that digital gold is an unregulated product. It is not classified as a 'security' like stocks or bonds, nor is it a commodity derivative. This means it falls outside SEBI's direct purview. Consequently, SEBI has barred its registered entities, such as stockbrokers and investment advisors, from dealing in or recommending digital gold. The regulator's main concern is the absence of a formal framework for investor protection, leaving consumers exposed to potential risks.
What 'Unregulated' Means for Your Investment
The term 'unregulated' does not mean digital gold is illegal; it remains legal to buy and sell. However, it signifies that key investor safeguards are missing. For instance, there is no official grievance redressal mechanism like SEBI's SCORES portal for digital gold investors. Disputes must be handled through the platform's customer support or consumer courts. Furthermore, there is a significant counterparty risk. If the platform or the company holding the physical gold in vaults faces financial trouble or shuts down, investors have limited legal recourse and could lose their money. There is no regulatory-mandated audit to verify that the digital issuance is 100% backed by physical gold.
The Industry's Move Towards Self-Regulation
In response to the regulatory vacuum and to build investor trust, industry players have taken steps towards self-governance. Associations like the India Bullion and Jewellery Association (IBJA) have worked on creating a Self-Regulatory Organisation (SRO) for digital gold providers. More recently, major players formed the Digital Precious Metal Assurance Council of India (DPMACI) to establish standards for consumer protection, including mandatory independent audits of gold vaults, standardised disclosures, and a grievance redressal system with an ombudsman. While a positive step, this self-regulation does not carry the same legal weight as oversight from a government body like SEBI or the RBI.
Safer, Regulated Alternatives
For investors seeking exposure to gold with the backing of a regulatory framework, SEBI and the RBI point towards several alternatives. Gold Exchange Traded Funds (ETFs) are mutual funds that trade on stock exchanges and are regulated by SEBI. They track the domestic price of gold and require a demat account to invest. Another option is Sovereign Gold Bonds (SGBs), which are issued by the RBI on behalf of the government. SGBs not only track the price of gold but also pay a fixed interest. Though new SGBs are not being issued as of 2024, they can be bought and sold on the secondary market. Both ETFs and SGBs offer a higher degree of safety and transparency compared to digital gold.
