Skip to main content

Digital Gold: Why SEBI Warns Investors to Stay Cautious?

 DigitalGold: Why SEBI Warns Investors to Stay Cautious?



As digital investment platforms gain popularity, many investors are turning to “Digital Gold” for convenience and accessibility. However, SEBI has issued a clear warning that digital gold operates outside its regulatory oversight and carries serious risks. Understanding these concerns is crucial for investors aiming to safeguard their wealth and choose safer, regulated alternatives.

Why SEBI Considers Digital Gold Unsafe?

1. Lack of Regulation
Digital gold is neither classified as a security nor recognized as a regulated commodity derivative under SEBI’s framework. This means platforms selling it; fintech apps, online portals, or jewellers; operate without formal regulatory supervision.

2. Counterparty Risk
Investors face the risk of platform failure or mismanagement. If the provider or vault custodian mishandles assets, fails, or engages in fraud, investors may have limited avenues to recover their holdings.

3. Operational Risk
Storage standards, insurance quality, and physical gold backing vary widely across platforms. In the absence of uniform norms or independent audits, the reliability of these arrangements remains uncertain.

4. No Investor Protection
Because digital gold is unregulated, investors do not enjoy protection under SEBI’s grievance redressal mechanism (SCORES) or stock exchange investor protection funds.

5. Hidden Costs
The convenience of digital gold often masks additional costs, including 3% GST on purchase, storage fees beyond a free period, and wide buy-sell spreads, which can significantly reduce overall returns.

Safer, Regulated Alternatives
SEBI recommends that investors seeking exposure to gold should do so through regulated avenues that offer transparency and security:

Gold Exchange Traded Funds (ETFs):
Fully regulated by SEBI, these funds are traded on stock exchanges and backed by physical gold held by approved custodians. They offer both liquidity and transparency.

Electronic Gold Receipts (EGRs):
Tradable on recognized exchanges, EGRs represent ownership of physical gold and provide a regulated structure for investing.

Sovereign Gold Bonds (SGBs):
Issued by the Reserve Bank of India on behalf of the government, SGBs carry a sovereign guarantee and offer a 2.5% annual interest in addition to gold price appreciation. While new tranches are launched periodically, existing bonds can be purchased through the secondary market.

For existing holders of digital gold, financial experts advise gradually transitioning to these regulated instruments after verifying the credibility and security arrangements of their current platform.

With warm regards,
Dr Shashank M Hiremath
DISM, B.Com, MBA, NET, M.Com (Banking), Ph.D.
Faculty of Finance, MBA Department
Presidency College and Business School, Bengaluru, Karnataka
LinkedIn: https://www.linkedin.com/in/shashankmh007 
Blog: https://meetshashankmh2000.blogspot.com/ 
Academician Researcher FinancialPlanner StockMarketTrader Investor Traveller
LinkedIn: https://www.linkedin.com/posts/shashankmh007_digitalgold-investors-sebi-activity-7396436278545858560-mULW?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAmerZYBKQhvMRYFxKGLVAHXdIOJHSCP5W8
Labels:

Comments

Post a Comment

Popular posts from this blog

Learn Industry-Relevant Skills for FREE: Courses explained by Dr. Shashank M Hiremath

 ðŸŽ“ Learn Industry-Relevant Skills for FREE:  Courses explained by Dr. Shashank M Hiremath In today’s fast-paced and dynamic world, upskilling has become essential for anyone aspiring to thrive in the ever-evolving job market.  Whether you're a student, academician, finance professional, or a data enthusiast, acquiring the right tools and technologies can give you a significant edge. As part of my continuous endeavor to empower learners, I’m excited to share four comprehensive, free-to-access courses in R Programming , Python , Power BI , and Advanced Excel —key tools demanded across industries today. 🎓  R Programming – FULL Course (10+ Hours) 📺 https://youtube.com/live/Q5g6lYUn6Q4?si=0zZgRO_LdDJYIfrT  R is one of the most powerful languages for data analysis and statistical computing. Whether you're into research, finance, or analytics, mastering R can elevate your data manipulation and visualization capabilities. Learn this to become industry ready. 🎓 ...
Post a Comment
Read more

Should we use Elliott wave theory approach in technical analysis to study and invest in the stock markets? - Dr Shashank M Hiremath

Dear Readers,   Greetings of the day!!   Elliott Wave Theory is a popular technical analysis approach used to analyse financial markets, including the Indian stock market. Developed by Ralph Nelson Elliott in the 1930s, the theory suggests that financial markets move in predictable patterns or waves.   According to Elliott Wave Theory, market price movements consist of alternating waves of expansion and contraction, which are driven by investor psychology and market sentiment. These waves are divided into two types: impulse waves and corrective waves.   Impulse waves, also known as motive waves, are the larger waves that move in the direction of the overall trend. They are further subdivided into five smaller waves, labelled as 1, 2, 3, 4, and 5. Waves 1, 3, and 5 represent the upward movement of the trend, while waves 2 and 4 are the corrective waves that retrace some of the price movement.   Corrective waves, on the other hand, are the smaller waves ...
1 comment
Read more

Exchange-Traded Funds (ETFs) Investment strategies | Dr Shashank M Hiremath | Saturday, May 18, `24

Dear Readers & Investors,   Warm greetings to all!   In the world of investing, Exchange-Traded Funds (ETFs) offer a diverse range of opportunities for investors seeking exposure to various asset classes, sectors, and investment themes. As you board on your investment journey or seek to diversify your portfolio, I am excited to share some insights into some of the best quality ETFs worthy of consideration.   Investment strategy: Suppose you select all the mentioned ETFs representing different sectors or asset classes, during a major market correction, you may allocate additional funds to purchase more units of each ETF, aiming to take advantage of lower prices.   Data extracted, as on Saturday, 18 May, `24   NSE Symbol ETF details (from NSE website) Price SILVERBEES Nippon India Silver ETF 88.37 AUTOBEES Nippon India Nifty Auto ETF 238.40 ...
14 comments
Read more