The Securities and Exchange Board of India (SEBI) has issued a public warning against investing in digital gold and e-gold products. The market regulator stated these popular online investment options remain unregulated and do not fall under any official regulatory body, exposing investors to significant risks. This caution comes amid a recent surge in digital gold's popularity, driven by rising gold prices and the ease of online buying.^[1][2][3] ### What is Digital Gold? Digital gold allows individuals to buy, sell, and store gold electronically without physically possessing the precious metal. Its price is directly linked to that of physical gold. Many platforms use blockchain technology to record these transactions.^[1][2][3] This investment method has become popular because it offers convenience and eliminates the hassle of storing physical gold. Investors can start with very small amounts, sometimes as low as ₹1. Digital gold also offers quick liquidity and the option to convert the investment into physical gold, such as coins or bars, when needed. M^[1][2][4][5]ajor platforms in India, including MMTC-PAMP, SafeGold, Augmont, PhonePe, Paytm, Google Pay, Jar, Gullak, and IndiaGold, offer these products. T^[4][6]he appeal grew stronger as MCX spot gold prices climbed by 59 percent in the last year, from ₹76,577 to ₹1.22 lakh per 10 grams. ### ^[1][2]Why SEBI Issued the Warning SEBI clarified that digital gold products are not recognized as securities or regulated as commodity derivatives under its framework. This means they operate entirely outside SEBI's regulatory supervision. The regulator noted that many online platforms and fintech intermediaries promote these products as convenient alternatives to physical gold. Beca^[7][2][3]use digital gold falls outside SEBI’s purview, it lacks the investor protection mechanisms available for regulated financial products. If a platform offering digital gold faces issues or defaults, investors would have no legal recourse or protection under SEBI's rules. Abhishek Kumar, a SEBI-registered investment advisor and founder of SahajMoney, explained that SEBI aims to warn users that these platforms are not regulated, so investor protection is absent in case of a default. ### Ke^[8][9]y Risks for Investors The primary risk associated with digital gold is its unregulated nature. Investors do not benefit from safeguards like insurance, grievance redressal, or guaranteed settlements that apply to SEBI-approved investments. This leaves investors without formal recourse if problems arise. A sign^[10]ificant concern is "counterparty risk." This means investors rely entirely on the honesty and stability of the company or platform offering digital gold. If the platform collapses or defaults, investors could lose their money or their gold. "If a digital gold platform collapses tomorrow, your money may be gone, and you'll have no legal protection under Sebi's investor safety framework," said Zerodha founder and CEO Nithin Kamath. There a^[10][8][11]re also operational risks, including doubts about whether the physical gold actually exists or is securely stored, as no independent regulator verifies these claims. Furthe^[9]rmore, digital gold can be an inefficient investment due to hidden costs. Nithin Kamath highlighted that buyers lose about 6 percent upfront. This includes a 3 percent Goods and Services Tax (GST) and another 2-3 percent due to price spreads, even before considering regulatory risks. This up^[11]front loss makes it a "subpar way to get exposure to gold," according to Kamath. ### Sa^[11]fer Alternatives for Gold Investment SEBI advises investors to consider regulated gold investment options for greater safety and protection. 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. Soverei^[1][10][12]gn Gold Bonds (SGBs) also offer a regulated way to invest in gold, although the government has stopped issuing new ones. These ^[10][11]regulated products offer oversight under SEBI, guaranteed clearing, transparent price discovery, and robust investor protection mechanisms. Experts suggest that investors should prioritize platform credibility and consider moving their investments to these SEBI-regulated gold products to avoid unnecessary risks. Invest^[13][10]ors should carefully assess the risks before putting money into digital gold. While convenient, the lack of regulatory oversight means these products do not offer the same level of safety as other gold investment avenues. Prioritizing safety over convenience is crucial to protect assets in the long run. META_T^[14]ITLE: SEBI Warns on Digital Gold Risks, Unregulated Nature, 6% Upfront Loss

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