The Securities and Exchange Board of India (SEBI) has warned investors against putting money into digital or e-gold products. These investments lie outside its regulatory ambit and carry “significant risks,” the markets regulator said on Saturday.
The warning follows the growing promotion of ‘digital gold' by several online platforms, saying it is a convenient alternative to physical gold. SEBI clarified that these offerings were neither classified as securities nor regulated as commodity derivatives.
What Is Digital Gold?
Digital gold is a way to buy and own small amounts of gold online. You purchase it through apps or websites, which claim to store an equal amount of real 24K gold for you in secure vaults. You get a digital record showing the gold you own, and you can sell it back anytime or even ask for physical delivery. It is marketed as easy and convenient.
How Digital Gold Works
- You pay money on an app/website.
- The provider records a corresponding quantity of gold (grams) credited to your account.
- The provider (or its vault custodian) claims to store physical gold in an insured vault. Sometimes a refiner issues a branded bar/receipt.
- You can sell back to the platform (instant liquidity) or in some offerings request delivery of physical gold/coins (fees and minimums apply).
How Digital Gold Compares To Regulated Alternatives
- Gold ETFs - mutual fund units that represent physical gold. Traded on stock exchanges.
- Sovereign Gold Bonds (SGBs) - issued by the government, pay interest, and are tax-efficient if held till maturity.
- Electronic Gold Receipts (EGRs) - tradeable receipts backed by physical gold stored in SEBI-approved vaults.
Benefits Of Digital Gold
- Easy to buy/sell anytime.
- Buy for as little as Rs 10-Rs 100.
- No need to store physical gold.
- Can redeem in coins/bars.
Cons Of Investing In Digital Gold
- Not regulated by SEBI or RBI.
- No guaranteed investor protection.
- Depends entirely on the company's honesty and stability.
- Possible hidden fees (delivery, storage, or making charges).
- Limited legal recourse if something goes wrong.
Is Digital Gold Taxed?
In India, buying gold, whether physical or digital, usually attracts GST, though the exact rate for digital gold can vary depending on how the provider structures the product. When you sell digital gold, any profit is treated as a capital gain, and the tax rate depends on how long you have held it.
