SEBI warns investors against unregulated digital gold schemes; urges investing only in regulated gold products

New Delhi (India) November 9: Markets regulator Sebi on Saturday cautioned investors against investing in digital or e-gold products and said such instruments do not fall within the regulatory framework, while they are also risky.

Sebi cautions against risky digital gold offerings

The warning comes after the regulator noticed that certain online platforms platforms appear to be facilitating trade in ‘digital gold’ or ‘e-gold’ with some describing it as an innovative and easy way of investing in gold.

The statement from the regulator says, "In this context, it is informed that such digital gold products are different from Sebi-regulated gold products as they are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of Sebi.”

"Such digital gold products may entail significant risks for investors and may expose investors to counter party and operational risks," it added.

Safer gold investment avenues under Sebi

Sebi has also made it clear that investor protection measures, which are applicable to regulated securities, will not be available for unregulated digital gold schemes.

Investors have the option to invest in gold through instruments regulated by Sebi, such as Gold Exchange Traded Funds (ETFs) of mutual funds, sovereign gold bonds offered by RBI and exchange-traded commodity derivative contracts and a recent kind of product -- Electronic Gold Receipts which may be brought or sold on stock exchange.

Besides, investments on these Sebi-regulated gold products are to be made through registered intermediaries and the regulatory framework of the regulator would apply, it said.

What is Digital Gold?

Digital gold investment is a technique of purchasing gold online which is supported with the physical gold in secure and insured vaults. But as per a recent Sebi notification, these commodities are not governed by Sebi's investor protection regulations.

Investors also need to be cautious about products that provide the option to purchase digital gold – this has implications including goods and services tax (GST), capital gains, and short-term gains.

Popular platforms offering digital gold 

According to information sourced from Tata Group-backed venture Caratlane, companies are now providing ‘mobile first’ digital gold programmes where people can invest in buying physical gold through their mobile phones.

Where these online gold offerings are sold is at platforms like SafeGold, CaratLane, Tanishq and even MMTC-PAMP websites where companies including PhonePe, Google Pay and Paytm are integrated suggesting potential buyers to invest in these online gold products.