SEBI digital gold warning, Digital gold investment: The Securities and Exchange Board of India (SEBI) has issued a public advice cautioning investors against dealing in so-called ‘Digital Gold’ or ‘E-Gold’ goods available through various internet platforms. The market regulator underlined that these offerings are not regulated by SEBI and lie completely outside of its scope.

SEBI digital gold circular

In its warning headed ‘Caution to public regarding trading in ‘Digital Gold”, SEBI stated, “SEBI has authorized investments in gold and gold-related securities through different SEBI-regulated gold products.  These include exchange-traded commodity derivative contracts, Gold Exchange Traded Funds (ETFs) issued by mutual funds, and Electronic Gold Receipts (EGRs) exchanged on stock exchanges.”

SEBI registered digital gold

It also stated that investments in these regulated gold products can only be made “through SEBI registered intermediaries and are governed by the regulatory framework prescribed by SEBI.”

SEBI clarifies Digital Gold is unregulated

According to SEBI, the agency has become aware that “some digital/online platforms are offering investors to invest in ‘Digital Gold/E-Gold Products’,” which are “being marketed as an alternative to physical gold investment.”

Why SEBI banned digital gold?

Nevertheless, SEBI cautioned that “such digital gold products are different from SEBI regulated gold products as they are neither notified as securities nor regulated as commodity derivatives.”  The warning stated that these products “operate entirely outside of the purview of SEBI.”

SEBI’s warning for those investing in ‘Digital Gold’, ‘E-Gold’

The market regulator emphasized the possible risks of investing in these unregulated securities, warning that “such digital gold products may entail significant risks for investors and expose investors to counterparty and operational risks.”

It further reaffirmed to shareholders that “none of the investor protection mechanisms under securities market purview shall be available for investments in such Digital Gold/E-Gold products.”