SEBI’s New Warning – Why 'Digital Gold' May Not Be Safe

Introduction: A Regulatory Red Flag On November 8, 2025, the Securities and Exchange Board of India (SEBI) issued a significant public advisory regarding the sale of "Digital Gold" and "E-Gold" products . While these products have gained popularity on various online platforms as a convenient alternative to physical gold, the regulator has stepped in to clarify that they operate in a regulatory grey area .

The Crucial Distinction: Regulated vs. Unregulated The core of SEBI's message is the distinction between regulated financial instruments and unregulated digital products.

• Regulated Gold Products (Safe): SEBI confirmed that it does enable gold investments through specific, regulated channels. These include Gold Exchange Traded Funds (ETFs) offered by Mutual Funds, Electronic Gold Receipts (EGRs) tradeable on stock exchanges, and exchange-traded commodity derivative contracts. These are governed by strict regulatory frameworks and offered through registered intermediaries.
• Digital Gold (Unregulated): In contrast, the "Digital Gold" products offered by many fintech and online platforms are not notified as securities and are not regulated as commodity derivatives.

The Risks for Investors SEBI's advisory highlights that because these Digital Gold products operate entirely outside its purview, investors are walking into a high-risk zone without realization. The specific dangers include:

1. Lack of Protection: None of the standard investor protection mechanisms available in the securities market apply to these products. If the platform fails, the investor has limited recourse.
2. Operational & Counterparty Risk: Investors face significant exposure to operational failures (systems going down, data loss) and counterparty risks (the entity selling the gold failing to honour the contract).

Stick to the Safe Lane While the ease of buying "Digital Gold" on an app is appealing, the lack of regulatory oversight makes it a risky bet. SEBI’s advisory serves as a reminder to prioritize safety over convenience. For those looking to invest in gold electronically, sticking to SEBI-regulated instruments like Gold ETFs and EGRs ensures that your investment is backed by a robust legal and regulatory framework.