SEBI WARNS AGAINST DIGITAL GOLD

NEWS – The Securities and Exchange Board of India (SEBI) has issued a public warning cautioning investors against digital gold and e-gold products, highlighting their unregulated nature and potential risks. The move comes amid rising gold prices and increasing popularity of digital investment platforms.

HIGHLIGHTS

What is Digital Gold?

• Digital gold refers to online purchase of gold without physical possession.
• It is backed by equivalent quantities of gold stored by service providers.
• Blockchain technology ensures transparency and fractional ownership.
• Investors can later convert holdings into physical gold (coins, bars, jewellery).

Why SEBI Issued a Warning

• Digital gold is not regulated under any financial authority — neither SEBI nor RBI.
• It is not classified as a security or commodity derivative.
• The absence of oversight exposes investors to counterparty and operational risks.

Key Investment Risks

• Counterparty Risk: Default by digital platforms due to lack of clearing corporations.
• Operational Risk: Platform shutdowns or technical failures may lead to loss of funds.
• No Investor Protection: SEBI safeguards and grievance mechanisms do not apply.
• Default Risk: Business failure of providers may cause total loss of investment.

Regulated Alternatives

• Gold ETFs and Electronic Gold Receipts (EGRs) – SEBI-regulated, transparent, and traded on exchanges.
• overeign Gold Bonds (SGBs) – Issued by RBI, backed by the Government of India, offering interest and capital appreciation.