Sebi Warns Against Digital Gold: Why Gold ETFs Offer Safer, Regulated Investment Options

India’s fascination with gold has entered the digital age — but not without concern. The Securities and Exchange Board of India (Sebi) has issued a cautionary notice warning investors against buying digital gold through fintech platforms, citing lack of regulation and investor protection.

Over the past few years, buying gold via apps has become a popular trend. With as little as ₹100, users can purchase “fractions” of gold and track live prices — all from their phones. Yet, Sebi’s latest advisory reminds investors that what glitters online may not always be golden.

Sebi’s Warning: Unregulated and Unsafe

In its official statement, Sebi clarified that digital gold or “E-Gold” products are not recognised as securities or commodity derivatives and therefore fall outside Sebi’s jurisdiction.

The regulator stated that it has “come to notice that some digital platforms are offering investors Digital Gold/E-Gold products, marketed as alternatives to physical gold.” However, these products are neither registered nor monitored by any financial regulator, creating a major risk for investors.

In simple terms — if a digital gold platform shuts down or defaults, there’s no legal safety net for the investor.

Unlike mutual funds or stockbrokers, which are tightly regulated under Sebi’s framework and undergo regular audits, digital gold providers operate without oversight. This makes them self-regulated entities — accountable only to themselves.

The Risks of Unregulated Gold

According to financial experts, Sebi’s warning couldn’t have come at a better time.

“Digital gold platforms function without regulatory supervision, so it’s hard to assess their credibility,” said Abhishek Kumar, founder of SahajMoney and a Sebi-registered investment advisor. “There’s counterparty risk — meaning the platform could fail to deliver gold or default on redemptions. There’s also uncertainty about whether the stored gold even exists or is audited properly.”

While many platforms claim to store equivalent gold in vaults, there’s no uniform system for verification, storage audits, or investor redressal in case of fraud. This leaves buyers exposed to financial loss if a platform collapses or mismanages assets.

Sebi’s Safer Alternatives: Gold ETFs and EGRs

Sebi’s message is not against investing in gold — it’s against doing so without regulation.

The regulator urges investors to consider Gold Exchange-Traded Funds (ETFs) and Electronic Gold Receipts (EGRs) — both of which are Sebi-regulated instruments that ensure transparency, accountability, and safety.

• Gold ETFs are mutual fund schemes that invest directly in physical gold. Each unit typically represents one gram of gold, securely held by an authorised custodian. Regular audits and exchange trading ensure liquidity and transparency.

• Electronic Gold Receipts (EGRs), launched recently on Indian stock exchanges, allow investors to buy and trade gold digitally, backed by physical bullion held in exchange-approved vaults.

These instruments offer the same price exposure as digital gold, but with the added benefit of legal protection under Sebi’s investor safety framework.

Why Investors Must Take the Warning Seriously

While some popular platforms like MMTC-PAMP and Augmont are backed by reputable entities, Sebi’s broader concern is about the lack of uniform regulation across the industry.

“Investors should take Sebi’s signal seriously,” Kumar said. “Moving holdings to regulated products like ETFs or EGRs ensures investor protection and transparency — things unregulated apps cannot guarantee.”

For investors drawn to the convenience of digital gold, the trade-off is clear: while it offers accessibility, it lacks assurance, oversight, and accountability.

Gold’s Digital Boom and the Regulation Gap

India’s gold market is undergoing a rapid transformation. With millennials and first-time investors turning to digital platforms, the traditional bullion market has found new life online. Yet, regulation hasn’t caught up.

Experts say fintech innovation should eventually be brought under a comprehensive regulatory framework to safeguard investors while encouraging innovation. Until then, Sebi’s warning serves as a reminder that financial safety matters more than convenience.

The Bottom Line

Digital gold may be the modern way to own India’s most loved metal, but it operates on uncertain ground. Gold ETFs and EGRs, on the other hand, combine accessibility with legal security — making them the smarter choice for long-term investors.

As the festive and wedding season fuels gold demand, Sebi’s message rings louder than ever: if it’s not regulated, it’s risky.