Are You Buying 'Unregulated' Digital Gold? Know This Before Investing

Digital gold has surged in popularity in recent years, particularly among younger Indian investors, offering a convenient way to invest in gold online. Purchases can start from as little as ₹10, making it accessible for first-time investors. From January to November 2025, Indian investors bought approximately 12 tonnes of digital gold, valued at ₹16,670 crore, marking a 50% increase compared to the previous year. However, a recent warning from the Securities and Exchange Board of India (SEBI) has cast a shadow on this booming market, highlighting the risks associated with unregulated digital gold platforms.

What is Unregulated Digital Gold?

SEBI has clarified that many digital gold products offered by online platforms operate outside its regulatory framework. Unlike regulated gold investment options such as Gold ETFs (Exchange Traded Funds), Electronic Gold Receipts (EGRs), and exchange-traded commodity derivatives, these digital gold products are not recognized as securities or regulated as commodity derivatives. This means they function without the standard safeguards and investor protection mechanisms that SEBI-regulated products offer.

The Risks Involved

Investing in unregulated digital gold exposes investors to several significant risks:

• Counterparty Risk: Most digital gold platforms are private, self-regulating entities, meaning the investment relies on the financial health and word of the company. If the company faces financial or operational trouble, investors may find it difficult to recover their funds or claim ownership of their gold holdings.
• Lack of Oversight: There is often a lack of independent audits or assurance that the gold you bought is fully backed by physical metal in a vault.
• No Investor Protection: Because these products are neither regulated as securities nor commodity derivatives, the strong investor protection mechanisms under SEBI, including grievance redressal, do not apply. In case of default, shutdown, or non-delivery of the physical gold, there is no formal regulatory avenue for redress.
• Operational Risks: These include risks related to the platform's technology, security, and storage practices.
• Pricing and Fees: Spreads on unregulated platforms can be high, eating into returns. Digital gold prices often include markups, payment gateway charges, and GST, making them potentially costlier than spot gold prices.

SEBI's Advisory: A Call for Caution

SEBI's advisory does not declare all digital gold platforms unsafe or fraudulent. Instead, it separates regulated gold investments from unregulated ones, urging investors to exercise caution and verify the regulatory status of the product before investing. The regulator reminds investors that in unregulated spaces, the responsibility for due diligence lies entirely with them.

Safer Alternatives

SEBI advises investors to consider regulated gold investment avenues:

• Gold ETFs: These are offered by mutual funds and are traded on stock exchanges.
• Electronic Gold Receipts (EGRs): These are also traded on stock exchanges and represent physical gold.
• Sovereign Gold Bonds (SGBs): These are issued by the Government of India and offer interest payments in addition to potential capital gains.
• Exchange-Traded Commodity Derivative Contracts: These allow investors to trade in gold futures and options through SEBI-registered intermediaries.

These regulated products fall under SEBI's framework and offer investor protection mechanisms, including structured disclosures, defined custody rules, and grievance redressal.

What to Do Before Investing in Digital Gold

If you choose to invest in digital gold, especially through unregulated platforms, consider these steps:

• Research the Platform: Choose reputable platforms with secure storage facilities. Look for strong security features like encryption and two-factor authentication.
• Check for Transparency: Ensure the platform provides transparent pricing based on real-time gold rates and discloses all fees.
• Verify the Custodian: Check who actually holds the metal by reviewing the terms and conditions. Common custodians include vault partners and refiners.
• Understand the Terms and Fees: Read all terms and conditions to avoid hidden charges such as storage costs, transaction fees, or conversion charges.
• Stay Informed: Keep track of gold prices and updates on digital investment regulations.

The Future of Digital Gold

Despite the regulatory concerns, the India Bullion & Jewellers Association (IBJA) is setting up a self-regulatory organization (SRO) for digital gold companies. The SRO is expected to start onboarding members in January 2026 and will ensure that customer holdings are fully backed by physical gold and regularly audited. It will also set minimum net worth requirements for digital gold providers.

SEBI’s caution should be viewed as a step towards progress. As expectations around disclosure, custody, and oversight become clearer, digital gold platforms will be judged not only by ease of purchase but also by the strength of their foundations.