The Allure of Digital Convenience
The promise of digital gold is simple and powerful: buy, sell, and accumulate 24-karat gold online without the hassles of physical storage, purity checks, or making charges. Platforms offered by fintech apps and jewellers allow investors to start with amounts
as low as one rupee, making it incredibly accessible for a new generation of buyers. Each purchase is supposed to be backed by an equivalent amount of physical gold stored in insured vaults. This blend of traditional asset security with modern technology has attracted millions of investors across India, with thousands of crores invested every month. However, what many investors don't realise is that this convenience comes at a cost, and it isn't just the price of gold.
A Major Regulatory Grey Area
The single biggest missing piece of the puzzle is regulation. In November 2025, the Securities and Exchange Board of India (SEBI) issued a caution to investors, clarifying that digital gold is not a regulated security. Unlike stocks, mutual funds, or even SEBI-regulated instruments like Gold ETFs and Sovereign Gold Bonds (SGBs), digital gold products fall outside the direct purview of both SEBI and the Reserve Bank of India (RBI). This means that the robust investor protection framework, which includes standardised rules, mandatory disclosures, and official oversight, does not apply. SEBI has even prohibited its registered intermediaries from selling or advising on these products, highlighting the regulatory gap. While not illegal, these products are governed by general contract and consumer protection laws, which offer a different, often less direct, form of recourse if things go wrong.
The Custodian and Counterparty Risk
When you buy digital gold, you are placing your trust in a chain of entities: the platform you buy from, the company that supplies the gold (like MMTC-PAMP or Augmont), and the custodian that stores the physical gold in a vault. This creates counterparty risk. What happens if one of these entities faces financial trouble or insolvency? Because the product is unregulated, there is no guaranteed process for ensuring investors get their money or gold back easily. You could become an unsecured creditor, making recovery difficult. While leading industry players have formed a self-regulatory body, the Digital Precious Metals Assurance Council of India (DPMACI), to enforce standards like independent audits and insured vaulting, this is an industry initiative, not a statutory mandate from a government regulator.
No Standardised Grievance Redressal
If you have an issue with a stockbroker or mutual fund, there is a clear, SEBI-mandated path for grievance redressal, such as the SCORES portal. For digital gold investors, the path is much less clear. Complaints regarding digital gold have been rising, with government data showing an increase from 17 complaints in 2020 to 112 by November 2025. While the new self-regulatory body plans an ombudsman framework, investors currently depend on the customer service of the individual platform they used. Without a centralised and regulated authority to turn to, resolving disputes over transactions, KYC issues, or fund transfers can be a frustrating process.
The Hidden Costs of a Transaction
Beyond the regulatory risks, several costs can erode the value of a digital gold investment. Firstly, a non-recoverable 3% Goods and Services Tax (GST) is levied on every purchase. Secondly, platforms have a 'spread'—a difference between the buying and selling price, which can range from 2% to 5%. Combined, these costs mean the price of gold needs to rise by 5-7% just for an investor to break even. Additionally, while storage may be free for an initial period (often a few years), charges can apply after that. If you decide to take physical delivery, you will also face making and delivery charges. These costs are not always prominently displayed, making it difficult for investors to calculate their true returns.
