On November 8, 2025, the Securities and Exchange Board of India (SEBI) made a shocking announcement. This news sent shockwaves through India’s fintech investment ecosystem. The market regulator issued a stark public advisory warning investors to stay away from unregulated digital gold and e-gold products sold on popular online platforms. But what exactly prompted this warning, and why should you care?
The Problem: Digital Gold Operating in a Regulatory Vacuum
SEBI’s alert reveals a troubling reality that many retail investors have overlooked. Digital gold has become increasingly popular through apps and platforms. They offer the convenience of purchasing gold in small denominations. However, these products operate completely outside SEBI’s regulatory framework.
Here’s the critical distinction: Digital gold products are neither classified as securities nor regulated as commodity derivatives. They exist in a legal grey zone—entirely outside SEBI’s purview. When you invest in digital gold through apps like Tanishq, MMTC-PAMP, SafeGold, or Augmont, you step into uncharted regulatory waters. There is no safety net beneath you.
SEBI explicitly clarified that these digital platforms differ fundamentally from its regulated gold products. The regulator stated: “Digital gold is being marketed as an alternative to investment in physical gold.” However, this is a false equivalence. It could leave investors financially vulnerable.
The Risks That Keep Regulators Awake at Night
SEBI’s warning doesn’t pull punches about the dangers lurking in digital gold investments. The regulator highlighted two critical risk categories that should alarm any prudent investor:
Counterparty Risk: This is perhaps the most frightening aspect. When you buy digital gold, you’re trusting a private platform to store real gold in vaults on your behalf. If the platform fails to deliver on its promise, defaults on redemption requests, or collapses entirely—you have virtually no protection. Your gold could vanish overnight, and you’d be left chasing recovery through a legal minefield with no guarantee of success.
Operational Risk: The gold you believe you own might not actually exist. It might be improperly stored. It could also be inadequately secured. Cybersecurity threats, hacking attempts, and fraud could compromise your holdings. Unlike regulated institutions, these platforms have no standardized operational safeguards or third-party audits that SEBI-regulated products must undergo.
The Protection Paradox: What You Won’t Get
Here’s where digital gold truly fails investors: None of the investor protection mechanisms available for SEBI-regulated securities apply.
Think about it. SEBI has grievance redressal mechanisms if you invest through a mutual fund or purchase shares. It also has compensation frameworks and enforcement power to protect you. If a platform collapses, there are legal remedies and potential compensation schemes.
With digital gold? Zero.
If a platform shuts down, if fraud occurs, if your gold mysteriously disappears—SEBI cannot help you. There’s no regulatory guarantee, no investor compensation fund, no authority to pursue recovery. You’re essentially a creditor in a failed company with slim chances of getting your money back.
Hidden Costs That Eat Into Your Returns
Beyond regulatory risks, digital gold investors face a hidden cost structure that erodes returns:
- Making and storage charges: Embedded upfront at 2–3% of purchase price
- Buy-sell spreads: You lose 3–6% just by trading
- Goods and Services Tax (GST): 3% mandatory tax, same as physical gold
- Delivery fees: Want to convert digital gold to physical? Pay additional making and shipping charges
- Storage time limits: Most platforms restrict holdings to five years, forcing exit decisions
- Exit penalties: After storage periods expire, additional charges force liquidation or physical delivery
These fees compound to create a significant drag on returns—money that vanishes regardless of gold price movements.
What SEBI Actually Recommends: The Safe Alternatives
SEBI isn’t just warning investors about what to avoid; the regulator clearly outlined the legitimate alternatives for gold investment:
Gold Exchange Traded Funds (ETFs): Mutual funds offering SEBI-regulated gold ETFs provide transparent pricing, lower costs, and full regulatory oversight. You gain exposure to gold price movements without the counterparty risks.
Electronic Gold Receipts (EGRs): Tradable on stock exchanges, these instruments represent physical gold held in certified depositories. They combine the benefits of physical gold ownership with regulatory safeguards and market liquidity.
Exchange-Traded Commodity Derivative Contracts: For sophisticated investors, these provide structured exposure to gold prices with SEBI-regulated market infrastructure.
All these alternatives are purchased through SEBI-registered intermediaries and governed by strict regulatory frameworks that protect investor interests.
Why the Timing Matters: SEBI’s Belated Wake-Up Call
Interestingly, SEBI isn’t new to this concern. The regulator previously cautioned against digital gold in 2021. However, warnings largely fell on deaf ears. Fintech apps continued aggressive marketing.
The 2025 advisory represents an escalation. It is a more forceful and explicit message that SEBI is losing patience with the unregulated digital gold space. This timing suggests the regulator may be preparing for stricter enforcement actions. Regulatory changes could catch unprepared investors off-guard.
The Broader Implications: What This Means for Investors
Increased Regulatory Scrutiny: Digital gold platforms and their fintech partners should expect heightened scrutiny. They will face pressure to either seek regulatory approval or face restrictions.
Platform Risk Elevation: Investors holding digital gold now face amplified concerns about platform sustainability, especially if regulatory pressure intensifies.
Shift to Regulated Products: SEBI’s warning will likely accelerate migration toward regulated gold investment vehicles, particularly among informed investors.
Vendor Pressure: Major sellers like MMTC-PAMP, Augmont, and others may face increasing pressure. They might need to restructure their offerings or seek regulatory status.
The Bottom Line: Don’t Confuse Convenience with Safety
Digital gold platforms excel at one thing: convenience. You can invest small amounts instantly through a mobile app, watch your holdings in real-time, and exit quickly. This user experience has attracted millions of retail investors.
But convenience comes at a terrifying price—complete regulatory abandonment.
SEBI’s November 8 advisory is a clarion call to Indian investors. Just because a product is popular, well-designed, and easy to use doesn’t mean it’s safe. Digital gold represents a high-risk private bet. It has zero regulatory backing and no investor protection mechanisms. There is no recourse if things go wrong.
If you’re currently holding digital gold, SEBI’s message is unambiguous: evaluate your position carefully and consider migrating to regulated alternatives. If you’re considering digital gold, remember that regulatory safeguards exist for a reason—to protect you when things fall apart.
The decision is ultimately yours. At least now you know what SEBI believes you should be aware of. Digital gold is a significant risk in an unregulated space. Proceed accordingly.
Key Takeaway: SEBI’s warning exposes a dangerous gap between investor expectations and regulatory reality. Digital gold promises the simplicity of app-based investing with the stability of physical gold, but delivers neither. Regulated alternatives exist for a reason—use them.
