SEBI on Digital Gold: Regulations, Risks and Investor Warnings Explained

Introduction

Digital gold has emerged as a popular way for individuals to gain exposure to gold through online platforms. Marketed as a convenient and fractional way to own gold, digital gold products are often offered through apps and websites that facilitate buying, selling, and storing gold digitally.

In recent years, however, regulators have expressed concerns about how digital gold products are structured and sold. Searches such as sebi digital gold, sebi digital gold warning, and sebi on digital gold risks reflect growing public interest in understanding the regulatory position and associated risks.

This article explains SEBI’s stance on digital gold, the regulatory gaps identified, and the risks highlighted for investors, strictly from an educational perspective.

What Is Digital Gold

Digital gold generally refers to products that allow individuals to buy gold in small quantities online. The gold is claimed to be backed by physical gold stored in vaults by third-party custodians.

Key characteristics typically include:

• Fractional purchase of gold

• Online buying and selling

• Claims of physical gold backing

• Optional delivery of physical gold at a later stage

Digital gold is not a standardized financial instrument under Indian securities laws.

Growth of Digital Gold in India

Digital gold gained popularity due to:

• Ease of online access

• Ability to invest small amounts

• Integration with fintech platforms and wallets

• Marketing around convenience and flexibility

As adoption increased, digital gold began to be positioned alongside traditional investment products, prompting regulatory scrutiny.

SEBI’s Position on Digital Gold

Securities and Exchange Board of India (SEBI) is the statutory regulator for securities markets in India. In November 2025, SEBI issued a public caution regarding digital gold transactions offered through online platforms.

SEBI clarified that:

• Digital gold is not regulated by SEBI

• Platforms offering digital gold are not SEBI-registered for this activity

• Digital gold does not fall under securities, mutual funds, or commodity derivatives regulations

This clarification was issued to address misconceptions among investors.

SEBI Digital Gold Warning Explained

SEBI’s warning highlighted that many platforms offering digital gold create the impression of regulatory oversight, even though no such regulation exists under SEBI.

Key points from the warning include:

• No investor protection framework under SEBI for digital gold

• No grievance redressal mechanism under securities laws

• No regulatory oversight on storage, purity, or redemption claims

• Risk of misunderstanding digital gold as a regulated investment

The warning was issued as a cautionary public notice, not as a ban.

Regulatory Status of Digital Gold in India

As of now:

• Digital gold is not regulated by SEBI

• It is not governed by RBI, as it is not a deposit or payment instrument

• It is not regulated by commodity market regulators in its current form

This creates a regulatory grey area where:

• Disclosure standards vary by platform

• Investor safeguards are platform-dependent

• Legal recourse may be limited

Key Risks Highlighted by SEBI

SEBI’s caution draws attention to several risks associated with digital gold:

a. Regulatory Risk

Lack of a dedicated regulatory framework means limited oversight and enforcement.

b. Counterparty Risk

Investors rely on platform operators, vault providers, and gold suppliers to honour claims.

c. Storage and Custody Risk

Claims of physical gold backing depend on third-party vault arrangements.

d. Transparency Risk

Pricing, spreads, and redemption terms may not be standardised or comparable.

e. Legal and Recourse Risk

Dispute resolution may not fall under established securities investor protection mechanisms.

Role of Platforms Offering Digital Gold

Platforms offering digital gold typically act as:

• Aggregators

• Facilitators of purchase and sale

• Interfaces to vaulting partners

SEBI has clarified that platform registration for other activities does not extend regulatory cover to digital gold offerings.

Investor Protection and Regulatory Gaps

The absence of regulation raises questions around:

• Audit of gold reserves

• Enforceability of ownership claims

• Handling of platform insolvency

• Transfer and inheritance of digital gold holdings

SEBI’s warning seeks to ensure that investors understand these gaps clearly.

Common Misconceptions About Digital Gold

SEBI’s communication addresses misconceptions such as:

• Digital gold is SEBI-approved

• Platform branding implies regulatory oversight

• Physical backing eliminates all risk

• Digital gold functions like mutual funds or ETFs

Clarifying these misconceptions is central to the warning.

What SEBI Advises Investors to Be Aware Of

SEBI advises investors to:

• Verify whether products are regulated

• Understand the nature of regulatory protection available

• Read terms and conditions carefully

• Avoid assuming regulatory safeguards where none exist

The emphasis is on awareness and informed decision-making, not product endorsement.

Conclusion

SEBI’s warning on digital gold serves as an important reminder that not all widely marketed financial products are regulated investments. Digital gold, while technologically enabled, operates outside SEBI’s regulatory framework and therefore carries distinct risks related to oversight, transparency, and investor protection.

Understanding SEBI’s position, the regulatory status of digital gold, and the risks involved helps investors interpret such products accurately within India’s financial ecosystem.

Disclaimer

This blog is intended solely for educational and informational purposes. The regulatory references, products, and platforms mentioned herein are illustrative and should not be construed as investment advice or personal recommendations. BondScanner does not provide investment advice through this content.

Readers are advised to independently evaluate financial products and seek professional guidance before making financial decisions. Investments and financial products are subject to risks, including the possible loss of principal. Please read all relevant disclosures and official communications carefully.