Not all that glitters is gold: SEBI flags ‘unregulated’ digital gold

Markets regulator Securities and Exchange Board of India (SEBI) in an advisory, warned the public against investing in digital or e-gold products, saying such instruments fall outside its regulatory framework and involve significant risks.

 

" It has come to the notice of SEBI that some digital/online platforms are offering investors to invest in ‘Digital Gold/E-Gold Products’. Digital Gold is being marketed as an alternative to investment in physical gold. 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," mentioned the official notice. 

 

Regarding investments in gold and gold-related instruments, SEBI has enabled various regulated gold products. These are 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 these SEBI-regulated gold products can be made through SEBI-registered intermediaries and are governed by the regulatory framework prescribed by SEBI. 

 

Sebi further clarified that investor protection mechanisms applicable to regulated securities will not extend to such unregulated digital gold schemes.

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