Sebi warned on digital gold in 2025; now physical backing and oversight in works
The finance ministry has sought feedback from regulators, banks and other stakeholders. A broad consensus has emerged that digital gold should be classified as a security under the Securities Contracts (Regulation) Act, 1956.
In 2025, the Securities and Exchange Board of India (Sebi) issued a warning to investors regarding digital gold products. According to a circular, Sebi stated that these digital gold products were distinct from gold products regulated by it because they were not classified as securities or commodity derivatives. They functioned outside Sebi's purview. Now, digital gold may come under the joint scrutiny of the Reserve Bank of India (RBI) and Sebi.
The government is contemplating stricter regulations for digital gold, which could include a requirement that each unit be backed by physical bullion and a regulatory framework under the joint oversight of the RBI and Sebi, according to an ET report. The finance ministry has solicited feedback from regulators, banks, and other stakeholders, with a consensus emerging that digital gold should be classified as a security under the Securities Contracts (Regulation) Act, 1956.
Digital gold assets are estimated to be around $3 billion, with an average transaction size of Rs 100. Industry stakeholders agree that digital gold has gained investor acceptance and should be brought under regulatory supervision. Concerns have been raised about the absence of oversight, which has allowed unscrupulous operators to enter the sector, raising issues of investor protection and money laundering.
Bringing digital gold under RBI and Sebi's supervision will ensure regulatory consistency and eliminate uncertainties for legal participants, including investors.
Digital gold and silver industries in India are forming a self-regulatory organization, the Digital Precious Metals Assurance Council of India. Key players include MMTC-PAMP and SafeGold, along with platforms like PhonePe, BharatPe, MobiKwik, Gullak, Lenden Club, and CRED. The council aims to establish standardized processes for purchase, sale, and storage of gold, ensuring customer protection.
Sebi had cautioned investors against digital gold products in 2025, stating that they are not government-permitted securities and do not fall under Sebi's regulatory framework. The warning came during a period of near-record-high global gold prices. Sebi noted that investors in digital or e-gold products would not have access to investor protection mechanisms available under Sebi's oversight.
The regulator reminded investors that these products lack investor protection mechanisms and are subject to counterparty and operational risks.
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