What Exactly is Digital Gold?
Digital gold is a way to buy 24-karat gold online without the hassle of physical storage. When you buy digital gold on platforms like PhonePe, Google Pay, or from sellers like MMTC-PAMP and Augmont Goldtech, the company supposedly stores an equivalent
amount of physical gold in a secure, insured vault on your behalf. You can buy or sell it in fractions, often for as little as one rupee, and can choose to take physical delivery in the form of coins or bars later. Its popularity has surged thanks to this convenience, making it seem like an easy entry point for small investors.
The Core of SEBI’s Warning: A Regulatory Black Hole
The Securities and Exchange Board of India (SEBI) issued a public caution in November 2025, advising investors to be careful with digital gold. The main issue is that digital gold is an unregulated product. It is not classified as a security, a commodity derivative, or any other financial instrument that falls under SEBI's jurisdiction. This means that platforms offering digital gold are not monitored by SEBI, and investors do not get the same protections available for regulated products. SEBI isn't banning digital gold, but it is making it clear that if something goes wrong, it cannot help.
Risk 1: No Official Grievance Redressal
Because digital gold is outside SEBI’s purview, investors have no access to official investor protection mechanisms. If you have a dispute with a platform—for instance, regarding pricing, purity, or even the existence of your gold—you cannot file a complaint on SEBI’s SCORES platform, a formal system for resolving investor grievances. Your only recourse would be the company's internal customer support or lengthy and expensive consumer court proceedings. This lack of a safety net is a significant risk, especially if a platform were to fail or shut down.
Risk 2: Counterparty and Custody Dangers
When you buy digital gold, you are trusting that the platform or its custodian actually has the physical gold to back your purchase. SEBI has flagged this as a major 'counterparty risk'. If the company selling the gold goes bankrupt, you could lose your entire investment. While reputable providers state their gold is held by independent trustees and subject to audits, there is no regulatory body to enforce these checks across the board. You must rely on the platform’s claims about vault security, insurance, and purity without independent verification mandated by a regulator.
Risk 3: Hidden Costs and Price Discrepancies
The price you see is not always what you get. Digital gold transactions come with several costs that can eat into your returns. First, there's a 3% Goods and Services Tax (GST) on every purchase, which is not recoverable when you sell. Additionally, platforms have a 'spread'—a difference of 2% to 5% between the buying and selling price. This means the value of your investment has to rise by that much just for you to break even. Other potential costs include storage fees, transaction charges, and fees for converting your digital holding into physical coins or bars.
Safer, Regulated Alternatives to Consider
For investors seeking exposure to gold with regulatory protection, SEBI points towards several alternatives. Gold Exchange Traded Funds (ETFs) are mutual funds that trade on stock exchanges and are backed by physical gold. Sovereign Gold Bonds (SGBs), issued by the RBI on behalf of the government, are another option, though new issues have been discontinued since 2024; they can still be bought on the secondary market. Electronic Gold Receipts (EGRs) are also traded on exchanges and represent gold in a dematerialized form. All these instruments are governed by a regulatory framework, offering a much higher degree of safety and transparency.
