SEBI Not Looking To Regulate Digital Gold, Says Chairman
The Securities and Exchange Board of India chairman Tuhin Kanta Pandey on Friday clarified that the markets regulator is not looking to regulate ‘digital gold’ or ‘e-gold’ products as these do not fall under its purview.
Speaking on the sidelines of the National Conclave on REITs and InvITs-2025, Pandey said that regulated gold-related investments can be made through exchange-traded funds (ETFs) offered by mutual funds or through other tradable gold securities.
Digital Gold Industry Seeks Regulation
The clarification came days after the digital gold industry urged the SEBI to bring digital gold platforms under formal regulation.
Earlier this month, SEBI had warned investors against investing in digital or e-gold products, saying such instruments fall outside its regulatory framework and involve significant risks.
The cautionary statement came after SEBI observed that some online platforms have been promoting ‘digital gold’ or ‘e-gold’ products as an easy alternative to investing in physical gold.
‘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,’ the regulator had stated.
‘Such digital gold products may entail significant risks for investors and may expose investors to counterparty and operational risks,’ it had added.
Investor Protection Mechanisms
Sebi had further clarified that investor protection mechanisms applicable to regulated securities will not extend to such unregulated digital gold schemes.
The regulator had stated that investors can gain exposure to gold through SEBI-regulated instruments such as Gold ETFs offered by mutual funds, exchange-traded commodity derivative contracts, and Electronic Gold Receipts tradable on stock exchanges.
Further, investments in these SEBI-regulated gold products can be made through registered intermediaries and are governed by the regulatory framework prescribed by the regulator, it had added.
Understanding Digital Gold and Its Risks
Digital gold, also known as e-gold, is a type of investment where investors can buy and sell gold online.
While digital gold may seem like a convenient way to invest in gold, it is essential to understand the risks involved.
Some of the risks associated with digital gold include counterparty risk, operational risk, and market risk.
Counterparty risk refers to the risk of the other party defaulting on their obligations.
Operational risk refers to the risk of errors or system failures that can result in losses.
Market risk refers to the risk of fluctuations in the price of gold.
Regulated Gold Investment Options
For investors looking to invest in gold, there are several regulated options available.
One such option is to invest in Gold ETFs, which are offered by mutual funds and are regulated by SEBI.
Gold ETFs allow investors to gain exposure to gold without having to physically hold the metal.
Another option is to invest in exchange-traded commodity derivative contracts, which are also regulated by SEBI.
Electronic Gold Receipts (EGRs) are another option, which can be traded on stock exchanges.
Conclusion
In conclusion, while digital gold may seem like a convenient way to invest in gold, it is essential to understand the risks involved.
Investors should exercise caution when investing in digital gold and should consider regulated options such as Gold ETFs, exchange-traded commodity derivative contracts, and EGRs.
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