The Securities and Exchange Board of India has issued a caution to the public against investing in digital gold and e-gold products. Although these offerings have been around for several years, soaring gold prices and the convenience of online purchases have significantly increased their appeal in the past year. Sebi noted that digital gold is often marketed as an alternative to physical gold, but these products remain outside any regulatory framework, exposing investors to elevated risks.
In its November 8, 2025, statement, SEBI clarified that certain platforms are promoting digital gold as an investment option similar to regulated gold instruments. However, these products are neither classified as securities nor recognised as commodity derivatives, placing them entirely outside Sebi’s jurisdiction. As a result, investors face potential counterparty and operational risks, and the regulator urged the public to choose supervised investment avenues such as gold ETFs, electronic gold receipts (EGRs), and exchange-traded gold derivatives.
Gold has dominated investment discussions throughout 2025, as investors of all sizes sought the metal for its safe-haven characteristics amid economic instability and market volatility. Digital gold purchases have also surged, with a report by Augmont estimating that Indians bought approximately 45 tonnes worth ₹55,000 crore as of November 2025. SEBI’s warning has therefore created uncertainty among existing digital gold holders, many of whom are now questioning the safety and future of such investments.
Meanwhile, the India Bullion & Jewellers Association (IBJA) has urged SEBI to establish a formal regulatory mechanism for digital gold platforms, but the regulator has not publicly responded. Until clarity emerges, investors must understand the implications of owning an unregulated product and consider steps to safeguard their holdings, including reassessing their exposure and exploring regulated gold-based investment alternatives.
What is Digital Gold?
Digital gold, or e-gold, enables investors to buy and sell gold online while the underlying asset remains physical bullion stored securely in vaults. Leading refiners and distributors such as MMTC-PAMP, Safegold and Digigold supply this gold through their own platforms as well as through partners. Popular apps, including Google Pay, PhonePe, Paytm, and Amazon Pay, offer digital gold by collaborating with these entities. Several jewellers—such as Tanishq, PC Jeweller, Kalyan Jewellers (Candere), CaratLane, and Jos Alukkas—also offer digital gold on their websites, sourced from the same backend partners. These platforms depend on professional vaulting services, security agencies, and logistics firms to store and transport the physical metal that investors purchase.
Introduced in India around 2012–13, digital gold allows individuals to buy, sell, and hold 24-carat, 99.9% pure gold electronically without any need for physical storage. Prices are usually higher than spot rates because they include storage and platform charges. MMTC-PAMP, a joint venture between PAMP SA of Switzerland and state-owned MMTC Ltd., is the most significant player in this segment. Investors can redeem their digital holdings at any time in the form of coins, bars, or jewellery. Backed by blockchain technology, digital gold offers accessibility, liquidity, and the ability to start investing with small amounts—advantages that have attracted many new buyers, especially as gold prices surged sharply over the past year, rising about 60 per cent from around ₹77,000 to around ₹1.24 lakh per 10 grams.
A significant drawback of investing in digital gold is that it currently operates outside SEBI’s regulatory framework. Although digital gold is offered through popular fintech apps and reputable jewellery brands, the credibility of these platforms rests solely on brand reputation—not on statutory safeguards. In essence, even the most trusted platforms operate in a regulatory vacuum, with no capital-market authority overseeing investor protection.
When investors purchase SEBI-regulated securities, they benefit from well-defined protections, grievance-redressal systems such as SCORES, and legal recourse backed by regulatory oversight. None of these mechanisms is available to buyers of digital gold. If the platform offering digital gold were to collapse, the investor would be classified as an unsecured creditor, meaning their investment could be partially or entirely lost.
The only form of protection for digital gold buyers is the contractual agreement they accept at the time of purchase. However, if the contract contains clauses that favour the platform or fails to protect the consumer adequately, the investor has virtually no fallback option. Thus, ownership of digital gold relies heavily on the platform’s promise that the gold is safely stored in a vault, without any enforceable regulatory guarantee.
In India, the purchase of gold—whether in physical form or through digital platforms—generally attracts GST. For digital gold, the applicable GST rate may differ based on how the provider structures and delivers the product. When an investor sells digital gold, any gains are treated as capital gains, and the tax payable depends on the duration of the holding. Fees and taxes associated with digital gold investments are often unclear or not fully disclosed, and these products typically lack transparency and regular, standardized audits.
In 2021, the market regulator found that digital gold sales violated Rule 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957, and directed stockbrokers and wealth managers to stop offering digital gold on their platforms.
A key takeaway for investors
Given the prevailing regulatory ambiguities and the inherent risks associated with digital gold, it is prudent for investors to discontinue further purchases of such products. Instead, gradually shifting to SEBI-regulated gold instruments can provide greater security and oversight for their gold exposure. While moving away from digital gold, investors should avoid making abrupt decisions. Liquidating the entire digital gold portfolio at once may generate a substantial capital gains tax liability.
A more sensible approach is to sell digital gold in small, periodic tranches and reinvest the proceeds into regulated gold products. This strategy enables investors to maintain their desired gold allocation while reducing regulatory risk. Additionally, redeeming physical gold against digital gold holdings should be avoided, as it often attracts high delivery fees and making charges, reducing the overall value realised.
Investors with sizeable digital gold portfolios may consider offloading 5–10 per cent of their holdings each week or month and reallocating the amount into regulated options such as Gold ETFs or EGRs. Such instruments offer the benefits of transparency, strong regulatory oversight, and easy accessibility—advantages that digital gold typically lacks.
In addition to enhanced investor protection, Gold ETFs also offer structural cost benefits. They generally carry low annual expense ratios and are not subject to the 3 per cent GST levied on the purchase of digital gold. Furthermore, Gold ETFs qualify for long-term capital gains taxation after a holding period of 12 months, whereas digital gold requires a 24-month holding period for the same benefit. Gold ETFs can also be used as collateral with brokers, a facility that may not be universally available for digital gold, depending on the contract terms.
Finally, while gold remains a valuable hedge during periods of uncertainty, investors should maintain exposure to the metal in line with their broader financial objectives and, importantly, through instruments under SEBI’s regulatory purview.
