Digital Gold Risks: SEBI
The Securities and Exchange Board of India (SEBI) has issued a strong advisory cautioning investors against investing in unregulated digital gold/e-gold products, highlighting their high risks and lack of investor protection.
- Digital gold is not classified or regulated as a security or commodity derivative and lacks the investor protection mechanisms available for SEBI-approved products.
- Investors rely entirely on the issuer, creating a high risk of default on physical gold or cash delivery.
- Market safeguards like insurance, grievance redressal, and guaranteed settlements do not apply, leaving investors without formal recourse.
- Digital gold refers to buying gold electronically without physical possession, with its price linked to physical gold. Created using blockchain technology, it allows investors to buy, sell, and store gold online.
- It is easy to access, can be sold quickly in emergencies, and allows investment with small amounts.
- It removes storage hassles and can be converted into physical gold like coins, bars, or jewellery when needed.
- SEBI advises investors to use regulated gold investment options such as Sovereign Gold Bonds (SGBs), Gold exchange-traded fund (ETF), Electronic Gold Receipts (EGRs), and commodity derivatives.
