The Securities and Exchange Board of India (Sebi) has issued a warning to the public about the increasing trend of investing in unregulated digital gold products. Sebi has advised investors to exercise caution and select only regulated gold investment options that it oversees.

Understanding Sebi-regulated gold investments

The regulator, Sebi, has reminded investors that there are safe and regulated ways to invest in gold. Sebi has facilitated investments in gold and related instruments through various regulated gold products such as exchange-traded commodity derivative contracts, Gold Exchange Traded Funds (ETFs) offered by mutual funds, and Electronic Gold Receipts (EGRs) tradeable on stock exchanges. According to the regulator, these investments can only be made through Sebi-registered intermediaries and are governed by the regulatory framework set by the regulator.

These regulated avenues provide transparency, investor protection mechanisms, and are overseen by Sebi to guarantee compliance and safeguard investors.

The growing lure of ‘digital gold’

Despite these legitimate options, the regulator has noticed that several digital and online platforms are now offering what they call 'Digital Gold' or 'E-Gold Products.' Sebi has stated that digital gold is being marketed as an alternative investment to physical gold. These platforms attract investors by highlighting convenience and small-ticket investments, but, according to Sebi, they are not subject to any regulatory oversight.

This means they are neither recognised as securities nor regulated as commodity derivatives. Sebi has warned that these so-called digital gold products operate entirely outside its purview and are therefore not covered by the rules or protections that apply to regulated investments.

The hidden risks behind digital gold

Sebi has warned that digital gold products can carry significant risks for investors. Since these offerings are not regulated, investors face counterparty and operational risks. This means the platform itself could default, shut down, or mishandle the gold supposedly held on its behalf. There is no guarantee that the gold actually exists or is stored securely.

Moreover, Sebi has emphasised that no investor protection mechanisms available in the securities market will apply to digital gold or e-gold investments. In simple terms, if issues arise — such as fraud, mismanagement, or the platform vanishing — investors will have no regulatory recourse or compensation.

Why investors must stay alert

This warning from Sebi tells a vital lesson: not all digital financial products are safe or regulated. While digital gold may seem easy to use, it can also hide significant risks behind appealing marketing. Sebi’s advice reminds investors to check whether an investment falls under its regulatory purview before investing.

If you want to invest in gold safely, the regulator recommends choosing regulated options such as Gold ETFs, EGRs, or exchange-traded gold derivatives — all available through Sebi-registered intermediaries. These products provide transparency, legal protection, and adhere to the regulatory framework designed to protect investors.