SEBI Warning on Digital Gold: What Investors in India Must Know

SEBI has warned investors that “digital gold” or “e-gold” products sold on various apps and websites are outside SEBI’s regulatory purview and can expose buyers to significant counterparty and operational risks. Investors will not get any of the protections available in SEBI‑regulated markets if such platforms default, freeze redemptions, or dispute ownership. 

What SEBI said 

• Digital/e-gold sold by online platforms is neither a security nor a commodity derivative, so it operates entirely outside SEBI’s jurisdiction. 

• No SEBI investor protection mechanisms apply to these products, including grievance redressal and safeguards prevalent in the securities market. 

• Investors seeking gold exposure should use SEBI‑regulated routes like Gold ETFs, exchange‑traded commodity derivatives, or Electronic Gold Receipts (EGRs) via registered intermediaries. 

Why this matters now 

Gold buying through apps has surged because buying as little as ₹10 feels simple and fast, like topping up a Fastag. But the legal wrapper behind many “digital gold” products is not supervised by a financial regulator, so the promise that “your gold is safe in a vault” depends entirely on the platform and its vendors. One adverse event, such as platform insolvency or a custody dispute, can disrupt access to your holdings. 

Common risks in digital gold 

• Counterparty risk: Your claim is against a private platform and its bullion partner, not through a regulated market structure. 

• Operational risk: Freeze on redemptions, reconciliation errors, tech outages, or sudden changes in terms. 

• Title and custody uncertainty: If vaulting, insurance, or trustee arrangements are weak or opaque, proving ownership can be hard during stress. 

• No market‑regulator redressal: Disputes don’t have SEBI’s grievance pathways or investor protection funds. 

Safer, regulated gold routes 

• Gold ETFs: Mutual fund products that hold gold and trade on exchanges, with daily NAVs, audited holdings, and SEBI oversight. 

• Electronic Gold Receipts (EGRs): Exchange‑traded receipts backed by vaulted gold on recognized stock exchanges. 

• Exchange‑traded commodity derivatives: For experienced investors to hedge or take exposure via regulated exchanges. 

How to choose your gold vehicle 

• Purpose first: For long‑term asset allocation and wealth compounding, Gold ETFs or EGRs offer transparent pricing, regulated custody, and easy exit. 

• Liquidity and costs: Compare ETF expense ratios, brokerage, and bid‑ask spreads; for EGRs, also check exchange liquidity and conversion charges to physical if needed. 

• Tax angle: Gold ETFs are taxed as debt funds; EGRs have their own framework. Speak with a tax advisor for your slab and holding period specifics. 

Practical guardrails before you buy 

• Verify regulation: Ask, “Is this product SEBI‑regulated?” If the answer is vague or “no,” do not proceed. 

• Read legal documents: Check who maintains custody ofthe gold, insurance details, audit frequency, and your legal title. If these are not clearly disclosed, that’s a red flag. 

• Avoid tiny wallet‑style stashes: Micro‑purchases on unregulated platforms can lull you into building a sizeable, risky position over time. Use regulated vehicles for systematic allocations. 

• Use registered intermediaries: Place orders only through SEBI‑registered brokers or mutual fund channels. 

Sample allocation approach 

For most long‑term investors, gold is a diversified, not a growth engine. A typical range is 5–10 percent of the portfolio, implemented via a single Gold ETF or a mix of Gold ETF and EGRs for liquidity and delivery of optionality. Rebalance annually so gold doesn’t drift above target after price spikes. 

Investor awareness: spotting marketing traps 

• “Guaranteed 24K” without a regulator: Purity claims do not substitute for regulation, robust custody, or enforceable title. 

• “Instant delivery at any time”: Check actual delivery fees, minimum quantities, and timelines, and whether delivery is available in your city. 

• “Festive offers” and ₹10 entry: Discounts can be distracted from structural risk. Focus on the rule of law, not the lure of low-ticket sizes. 

Maxiom Wealth view 

At Maxiom Wealth, the philosophy is simple: protect first, grow next, and keep costs and complexity low. Gold’s job in your portfolio is stability and diversification, so use regulated, liquid instruments and a written allocation rule. This helps you sleep better in volatile phases and frees your risk budget for productive assets like equities where compounding does the heavy lifting. Practically, set a SIP into a Gold ETF for your target percentage, and schedule a calendar reminder to rebalance once a year. 

To sum up, SEBI’s warning is a clear signal to avoid unregulated digital gold and move gold exposure to SEBI‑regulated channels like Gold ETFs and EGRs. Take ten minutes today to audit where your gold sits, switch risky holdings to regulated vehicles, and document your target allocation and rebalance plan.