SEBI warns investors over unregulated ‘digital gold’; Tanishq, MMTC among key sellers

In a press release issued on Saturday, SEBI said it has come to the notice of the regulator that some digital or online platforms are offering investors to invest in ‘Digital Gold or E-Gold Products.

While digital gold platforms aggressively promote it as an easy, seamless, and convenient way to buy gold online for as little as Rs 10, market regulator SEBI has warned investors about potential risks, noting that such platforms remain unregulated.

SEBI, in a statement, cautioned against investing in Digital Gold products offered through various online platforms, stating that these products are not regulated under the securities market framework and may carry significant risks.

In a press release issued on Saturday, SEBI said it has come to the notice of the regulator that some digital or online platforms are offering investors to invest in ‘Digital Gold or E-Gold Products.

The market regulator noted, “In this context, it is informed that such digital gold products are different from SEBI-regulated gold products as they are neither notified as securities nor regulated as commodity derivatives”.

“They operate entirely outside the purview of SEBI. Such digital gold products may entail significant risks for investors and may expose investors to counterparty and operational risks”, the press release further stated.

SEBI also cautioned that investors or participants are made aware that none of the investor protection mechanisms under securities market purview shall be available for investments in such Digital Gold or E-Gold products.

With the trend of investors growing interest in buying or investing in gold, many online platforms have come up which are offering such products, which are not regulated by SEBI.

Multiple platforms are offering digital gold.

Tanishq says on its website that, “Tanishq Digital Gold is a trusted and transparent method of purchasing 24 Karat pure gold to help you start your golden savings journey with the trust of Tata and powered by SafeGold”. It further says, investor or customers can start with as low as Rs 100 and exchange Digital Gold at any point on Tanishq.co.in or across 350+ Tanishq stores pan-India”.

Tanishq claimed it's making buying gold absolutely seamless for customers.

MMTC PAMP claims it's the leader in digital gold. It says customers can buy, sell, or redeem anytime. It promotes digital gold as an easy, convenient & affordable way to build gold holdings.

Aditya Birla Capital also offers a digital gold investment opportunity as low as Rs 10. Paytm, Caratlane, Jos Alukkas, PhonePe, Shriram Finance, and some other platforms also offer digital gold products on their website and apps.

Though reputed, well-established, and trusted brands are less likely to default but customers still will not get any protections under securities regulation in case of default.

SEBI says it has enabled investments in gold and gold-related instruments through various regulated gold products like exchange-traded commodity derivative contracts, Gold Exchange Traded Funds (ETFs) offered by Mutual Funds, and Electronic Gold Receipts (EGRs) tradeable on stock exchanges. Investments in the SEBI-regulated gold products can be made through SEBI-registered intermediaries and are governed by the regulatory framework prescribed by SEBI.

Traditionally, the jewellers also used to offer a monthly investment scheme, where customers used to pay 11 equated instalments and the jeweller used to contribute the 12th instalment. The whole transaction was based on trust. Later, seeing the potential risk, such steps were discouraged by the government.