Digital Gold Investment: Why SEBI Warned Investors About the Risks of Digital Gold

New Delhi, November 10, 2025: The Securities and Exchange Board of India (SEBI) has issued a strong advisory cautioning investors about the risks of investing in digital gold, a product that has become increasingly popular over the past decade. While digital gold offers a convenient way to invest in the precious metal without physically holding it, SEBI has clarified that it does not fall under any regulatory framework, making it a risky investment option.

What Is Digital Gold?

Digital gold is a modern form of gold investment that allows users to buy and store gold electronically. Investors can purchase gold worth as little as ₹10 through fintech platforms like PhonePe, Paytm, and Google Pay, which partner with companies such as MMTC-PAMP and Tanishq to offer this service. The purchased gold is stored securely in vaults on behalf of the investor, who can later redeem it in physical form or exchange it for jewellery.

Introduced in India about 10–12 years ago, digital gold gained momentum with the rise of fintech companies. It appeals especially to young and small-scale investors who prefer flexibility, convenience, and low entry barriers compared to traditional gold purchases.

SEBI’s Warning: No Regulation, High Risk

On November 8, 2025, SEBI released an official statement highlighting that digital gold is not regulated by any financial authority in India—not SEBI, not RBI, and not even the Ministry of Finance.

This means that if a digital gold provider fails, mismanages investor funds, or faces fraud, there is no legal protection or government-backed redressal mechanism for investors. SEBI emphasized that this lack of regulation makes digital gold an inherently risky product, particularly when compared to regulated investment options like:

• Gold Exchange Traded Funds (ETFs)

• Gold Mutual Funds

• Sovereign Gold Bonds (SGBs)

All these alternatives are supervised and protected under SEBI and RBI frameworks, ensuring better investor safety and transparency.

Why Digital Gold Became Popular

Despite being unregulated, digital gold’s popularity has surged due to several factors:

Ease of Access: Investors can buy gold anytime, anywhere, directly from their smartphones.

Low Investment Amounts: Platforms allow purchases starting from just ₹10, making it accessible to all income groups.

No Storage Hassles: Since the gold is stored in secure vaults, investors don’t have to worry about theft or storage costs.

Liquidity and Redemption: Investors can sell or redeem their gold digitally at current market prices.

According to recent data, digital gold transactions via UPI jumped from ₹762 crore in January 2025 to ₹1,410 crore in September 2025, reflecting a growing appetite for this form of investment.

Experts Say: Most Investors Unaware of Risks

Financial experts point out that most investors mistakenly assume digital gold is as safe as Gold ETFs or SGBs, without realizing that it lacks any formal regulatory oversight. Since digital gold is offered by private fintech or jewellery companies, the safety of their gold holdings depends entirely on the company’s credibility and storage partners.

If the company goes bankrupt, or if disputes arise regarding storage or redemption, investors could lose their entire investment with limited legal recourse.

SEBI’s Objective: Investor Awareness

SEBI’s latest statement aims to educate and protect investors before any potential financial losses occur. The regulator’s goal is to ensure that retail investors make informed decisions and understand that digital gold investments do not come with the same safeguards as other regulated financial products.

A senior SEBI official remarked that in case of any default or fraud involving digital gold platforms, “the government cannot intervene to compensate investors,” since the product lies outside the regulatory system.

Safer Alternatives Recommended by SEBI

SEBI has urged investors to consider the following regulated gold investment options instead:

• Gold ETFs: Traded on stock exchanges and regulated by SEBI, these allow investors to gain exposure to gold prices without owning physical gold.

• Gold Mutual Funds: These funds invest in gold ETFs and are managed by professional fund houses.

• Sovereign Gold Bonds (SGBs): Issued by the Reserve Bank of India (RBI), they offer fixed interest rates along with gold price appreciation, making them one of the safest gold-linked products.

Bottom Line

While digital gold offers convenience and flexibility, it also comes with significant regulatory and security risks. SEBI’s advisory serves as a reminder that investors should prioritize transparency, safety, and legal protection over convenience.

Those interested in gold as an investment should consider regulated instruments like ETFs or SGBs, which provide both returns and safety under official oversight.

As SEBI continues to monitor evolving fintech trends, investors are urged to remain cautious, read platform terms carefully, and diversify their portfolios to minimize risk.