By IndiaHub 
After SEBI issued the advisory, many digital gold investors are in a dilemma about what they should do with their digital gold investments. Should they rush to redeem such investments or hold them? Let’s know what experts advise. Before that, have a look at what SEBI said in its instructions.
What are SEBI’s latest instructions about digital gold?
The share market regulator said that it has come to its notice that some digital/online platforms are offering investors to invest in ‘Digital Gold/E-Gold Products’.
“Digital Gold is being marketed as an alternative for 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.”
SEBI has further cautioned investors that none of the investor protection mechanisms under securities market purview shall be available for investments in such digital gold/e-gold products.
Explaining about the availability of well regulated products for the purpose of investment in gold, SEBI, in its release titled ‘Caution to public regarding dealing in ‘Digital Gold”, said that it has enabled investments in gold and gold-related instruments through various SEBI-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. It further said that investments in these SEBI-regulated gold products can be made through SEBI-registered intermediaries and are governed by the regulatory framework prescribed by it.
What is the risk of investing into digital gold?
Amar Ranu, Head – Investment Products & Insights, Anand Rathi Shares and Stock Brokers, says that anyone holding or buying digital gold/e-gold through fintech apps, wallets, or other non-SEBI-regulated platforms needs to pay attention after this order.
The lack of regulatory oversight means their rights (for example, to redeem, conversion to physical gold, guarantee of vaulting, transparency of backing) may not be as robust as regulated products, Amar explains.
“For an individual holding a larger ticket size, it means the absolute risk may be greater (vaulting shortfall, platform failure, etc.). Our take is that one may continue only if one is comfortable with the risk. Because the product is not regulated, one should treat it with a somewhat higher risk premium (or reduce allocation) compared to regulated gold products,” says Amar.
The recent crisis related to availability and delivery of physical gold and price mismatch between physical gold and gold futures have also given good indication about the hidden risk which is exposed during such period of extreme volatility.
However, some do not see any alarm bell in SEBI’s advisory. Suvankar Sen, CEO, Senco, says that over the past few years, digital gold has gained strong acceptance, especially among younger consumers who appreciate its accessibility and flexibility.
The advisory doesn’t discourage such investments but highlights the need for investors to be more discerning and to choose platforms that are credible, transparent, and backed by trusted jewellers, Suvankar opines.
“It mainly serves as a reminder for customers to verify where and how their gold is stored, ensuring their investments remain secure and traceable,” says Suvankar.
Should investors hold, sell or buy digital gold after Sebi’s order?
Suvankar says that there’s no need for panic or sudden redemptions as investors should review where they’ve purchased their digital gold from.
“If it’s from a reputed and transparent platform, they can continue with confidence. SEBI’s message is essentially about awareness, urging customers to ensure that their investments are held with accountable and credible institutions,” says Suvankar.
Abhishek Kumar, a SEBI-Registered Investment Advisor, however, advises to immediately redeem digital gold investments and move them to a SEBI-regulated product.
“If you’re holding digital gold right now? Exit. Move it to a legitimate SEBI-regulated gold product through your broker. You might take a small loss, but you won’t risk 100% loss. The shiny app isn’t the product. Trust is,” Abhishek says.
“Gold ETFs and e-gold receipts are SEBI-regulated. Your money has actual protection and insurance behind it. Digital gold apps operating outside SEBI have zero investor protection. If it goes south, you have zero legal recourse. There is no compensation fund, nothing,” Abhishek opines.
Sandeep Parwal , Founder SPA Capital, advises investors to exercise caution before investing in digital gold.
“EGRs and digital gold operate in entirely different regulatory contexts. Digital gold remains outsideSEBI’s purview, with no structured framework ensuring investor protection or verifying the existence of physical backing. This creates potential risks for investors who rely on unregulated platforms,” opines Sandeep.
Sandeep further says, “Given the lack of regulatory validation, investors should exercise caution and understand the limitations of digital gold products.”
Amar says if one already holds digital gold, he does not necessarily need to panic-redeem tomorrow, but he should re-assess by asking the platform questions about vaulting, backing, redemption terms, fees and liquidity.
“If the quantum is small (say part of a diversified portfolio) and if one is comfortable with the platform’s credibility, one may continue – but with caution. On the other hand, if the amount is large and one doesn’t have full comfort on redemption/vaulting/backing, one may consider redeeming gradually and shifting to SEBI-regulated products,” Amar advises.
What should be the precautions digital gold investors need to take in the future?
Amar says that investors in digital gold should exercise caution by choosing only reputed and transparent platforms that clearly disclose their vaulting and audit arrangements.
“They must verify that the gold is backed 1:1 by physical holdings stored with independent, verified custodians and that redemption into physical gold is possible on fair terms. Regularly reviewing platform credibility, storage fees, and buy–sell spreads is essential,” opines Amar.
The most important precaution is to buy only from trusted and established jewellers or institutions that prioritise transparency, says Suvankar.
“Customers should know where their gold is stored, whether it’s insured, and if regular audits are conducted. Investing through recognised brands with a physical retail presence and a strong legacy of purity,” Suvankar advises.
Amar says that given the regulatory uncertainties in digital gold, it is prudent to prefer or at least include regulated gold exposure in the portfolio as the “core” and treat digital gold as a tactical or satellite allocation (if at all).