SEBIs Stern Warning: Understanding the Risks of Unregulated Digital Gold
India's market regulator SEBI warns against digital gold, citing its unregulated nature and lack of investor protection. While convenient, these products carry significant risks, including counterparty and operational vulnerabilities.
The Securities and Exchange Board of India (SEBI) has issued a stern warning regarding digital or e-gold products, emphasising their unregulated status and the significant risks they pose to investors.
Despite being marketed as an easy way to buy gold instantly for as little as Rs 10, digital gold falls outside SEBI's jurisdiction, meaning there is no regulatory oversight for its management, storage, or trading.
SEBI clarifies that digital gold is neither a security nor a regulated commodity derivative, offering no investor protection if issues arise such as platform shutdowns, mishandled funds, or fraudulent claims.
This lack of regulation exposes investors to counterparty and operational risks, as the reliability of the underlying gold and the providers financial stability are unchecked. For safer gold investment, SEBI recommends regulated alternatives like Gold ETF's, Sovereign Gold Bonds (SGBs), and Electronic Gold Receipts (EGRs), which offer transparency, liquidity, and robust regulatory oversight.