SEBI’s Big Warning and Caution To Investors On Digital Gold As Yellow Metal Rally Cools Off | Image:
ANI
Amid a market environment where the recent rally in the ‘yellow metal’ has shown signs of cooling off, the Securities and Exchange Board of India (SEBI), the country’s capital markets regulator, has issued a significant and timely public caution.
The advisory, released on November 8, 2025, targets investors dealing in ‘Digital Gold/E-Gold Products’ offered by various online platforms, making it unequivocally clear that these widely marketed products fall entirely outside the regulatory safety net provided by SEBI.
SEBI’s key message is simple: products not under its direct supervision do not offer the same protection.
Unregulated ‘Digital Gold’ Offerings Draw SEBI’s Attention
SEBI noted that numerous digital and online platforms have recently begun offering these products. According to the release, the regulator observed that “some digital/online platforms are offering investors to invest in ‘Digital Gold/E-Gold Products’,” which is being “marketed as an alternative for investment in physical gold.”
This influx of unregulated offerings, often pushed via popular financial apps and online retailers, has prompted SEBI to step in and clarify the crucial difference between protected and unprotected investments in the yellow metal.
Understanding the Difference: SEBI-Regulated vs. Unregulated Gold
SEBI highlighted the existing, secure avenues for gold investment that are governed by its framework. These include:
- Exchange Traded Commodity Derivative Contracts
- Gold Exchange Traded Funds (ETFs) offered by Mutual Funds
- Electronic Gold Receipts (EGRs) tradeable on stock exchanges
The regulator confirmed that investments in these regulated products are made through SEBI-registered intermediaries and operate under prescribed regulatory frameworks.
In contrast, the market watchdog clearly stated that the popular ‘Digital Gold’ products are fundamentally different from these regulated instruments.
SEBI emphasised, “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.”
Counterparty and Operational Risks Detailed
The core of SEBI’s warning lies in the potential dangers associated with these unregulated platforms. Since there is no statutory body overseeing the creation, custody, or redemption of these digital units, investors are exposed to numerous financial pitfalls.
The caution explicitly warns that unregulated digital gold “may entail significant risks for investors and may expose investors to counterparty and operational risks.”
Counterparty risk refers to the danger that the institution or company holding the underlying physical gold on the investor’s behalf may default, become insolvent, or mismanage the assets. Operational risk encompasses issues related to the platform’s security, technology failure, or fraud.
Investor Protection Mechanisms are Absent
By operating outside the SEBI’s purview, these products bypass the mandatory investor protection frameworks built into the securities market.
SEBI issued a definitive warning on this matter: “Investors/participants are made aware that none of the investor protection mechanisms under securities market purview shall be available for investments in such Digital Gold/ E-Gold products.”
The regulator is, in essence, advising the public to exercise extreme caution and stick to regulated instruments when seeking exposure to gold, ensuring their investments are protected by the official oversight mechanisms.