Digital Gold and SEBI’s Warning: What It Means and Safer Alternatives
Last updated: 13 October 2026
Quick answer: SEBI warned on 8 November 2025 that digital gold sold through apps is neither a notified security nor a regulated commodity derivative, so it sits outside SEBI's oversight and no securities-market investor protection applies. The product is legal, but you carry counterparty and operational risk. SEBI pointed investors to gold ETFs, Electronic Gold Receipts and exchange-traded gold derivatives instead.
Last updated: 13 October 2026 Quick answer: SEBI warned on 8 November 2025 that digital gold sold through apps is neither a notified security nor a regulated commodity derivative, so it sits outside SEBI's oversight and no securities-market investor protection applies. The product is legal, but you carry counterparty and operational risk. SEBI pointed investors to gold ETFs, Electronic Gold Receipts and exchange-traded gold derivatives instead. Key takeaways The warning: SEBI cautioned investors on 8 November 2025; its chairman said on 21 November it was not looking to regulate the product. Main risks: counterparty, operational and platform risk, with no SEBI grievance route. Costs: 3% GST on purchase plus a buy-sell spread. Tax: treated like physical gold; long-term only after 24 months. Still popular: WGC estimates Indians bought 4.8 tonnes in Q2 2026. Alternatives: gold ETFs, gold funds of funds and EGRs are SEBI-regulated. If you have ever bought "₹100 of gold" on a payments app, you own digital gold. Its appeal is obvious: tiny amounts, instant purchase, no locker. But in November 2025 the markets regulator told investors, in effect, that it has no say over this product and cannot protect them if something goes wrong. This guide explains the digital gold SEBI warning in plain terms: what digital gold is, exactly what SEBI said, the real risks and costs, what the government is reportedly considering, what to do if you already hold some, and the regulated alternatives. What is digital gold? Digital gold is a way to buy physical gold in small fractions online, with a private bullion company storing the metal in a vault on your behalf. You see a balance in grams on the app and can sell it back or, usually, ask for delivery as coins or bars. The structure is contractual. You buy from the gold seller through the app, which acts as a distributor. The seller arranges vault storage and typically appoints an independent trustee meant to safeguard buyers' interests. None of these parties is regulated by SEBI for this product. How digital gold works: app, gold seller, vault and trustee, without SEBI regulation Demand has been substantial. The World Gold Council estimates Indians bought 6.5 tonnes of digital gold in Q1 2026 and 4.8 tonnes in Q2 2026, a period when total Indian gold demand was 131 tonnes in Q2. Bullion refiner MMTC-PAMP relaunched its digital gold and silver offerings in May 2026, so the product is clearly not going away. What exactly did SEBI warn about digital gold? On 8 November 2025, SEBI noted that some online platforms were promoting digital gold or e-gold as an alternative to physical gold. It made three points. Not regulated by SEBI: these products are neither notified as securities nor regulated as commodity derivatives, so they operate outside SEBI's purview. Significant risks: buyers may be exposed to counterparty and operational risks. No investor protection: mechanisms that protect securities-market investors do not cover these schemes. SEBI then pointed investors to regulated ways of investing in gold: gold ETFs offered by mutual funds, Electronic Gold Receipts traded on stock exchanges, and exchange-traded commodity derivative contracts. These can be bought through SEBI-registered intermediaries. On 21 November 2025, SEBI chairman Tuhin Kanta Pandey said the regulator was not looking to regulate digital gold, as it does not fall within its remit. So the warning was not the prelude to a SEBI framework; it was a statement that investors are on their own. Is digital gold illegal? No. Buying digital gold is legal, and established bullion companies sell it. The point is that it is a commercial purchase of a commodity governed by contract and consumer law, not a regulated investment. That changes who you can complain to and what protection you have. What are the real risks of digital gold? Counterparty risk Your claim depends on the gold seller actually holding the metal and staying solvent, and on the trustee and vault arrangement working as described. There is no SEBI-mandated audit, disclosure or segregation standard for the product, unlike a gold ETF whose holdings are disclosed and audited under mutual fund rules. Platform and operational risk The app is a distributor. If it changes partners, shuts the product or suffers a technical failure, you depend on the seller's terms to get your gold or money back. Apps also generally limit how long gold can be stored without charges or before delivery or sale is required; check your platform's terms. No regulator to escalate to With a mutual fund or broker you can escalate through SEBI's SCORES system and online dispute resolution. With digital gold, your route is the platform's own grievance process and then consumer forums. See our guide to complaining through SEBI SCORES, ODR and the ombudsman (/insights/how-to-complain-sebi-scores-odr-ombudsman) for what regulated products give you. High built-in cost You pay 3% GST on every purchase. Platforms also quote a buy price above the sell price; industry reports put typical spreads at a few per cent. Together, these mean gold must rise noticeably before you break even. Digital gold costs: about 6.2% price rise needed to break even versus about 0.2% for a gold ETF in this example In the illustration above, with 3% GST and a 3% sell discount, ₹10,000 of digital gold buys metal worth about ₹9,709, which you can sell for about ₹9,418 at an unchanged price. Gold must rise about 6.2% just to get your money back. A gold ETF bought and sold on an exchange costs a fraction of that in trading costs, plus an annual expense ratio. How does digital gold compare with regulated alternatives? Digital gold SEBI warning: digital gold compared with gold ETFs, gold funds and electronic gold receipts Feature Digital gold Gold ETF Gold fund of funds Electronic Gold Receipt Regulator None for the product SEBI SEBI SEBI What you hold Contractual claim on vaulted gold Fund units backed by gold Fund units investing in a gold ETF Demat receipt for vaulted gold Demat needed No Yes No Yes Minimum As little as ₹1-₹10 One unit Small SIPs From 100 mg on exchange GST on purchase 3% Nil Nil Nil while traded; 3% on withdrawal Long-term after 24 months 12 months 24 months 12 months Physical delivery Usually, at a cost No No Yes, via vault manager Gold ETFs A gold ETF is a mutual fund scheme listed on the exchange, backed by physical gold held with a custodian and subject to SEBI's mutual fund rules on disclosure and audit. Indians put about ₹45,925 crore into gold ETFs in January-September 2026, according to AMFI data reported by Business Standard. Read more in our gold ETF guide (/insights/gold-etf) . Gold funds of funds A gold FoF invests in a gold ETF but works like any mutual fund. It suits investors without a demat account who want a monthly SIP, the closest regulated match to small app-based purchases. Expense ratios are slightly higher because of two layers of fees. We can help you set one up through our mutual fund services (/products/mutual-funds) . Electronic Gold Receipts EGRs are SEBI-regulated receipts for gold held in accredited vaults, credited to your demat account, tradable on the exchange and convertible into physical gold. BSE has offered them since 2022; NSE launched its segment on 4 May 2026. Liquidity is still thin and many brokers do not yet offer them easily, so they are better for patient investors who may want physical delivery later. Is the government planning to regulate digital gold? Possibly, but nothing is final. In September 2026, media reports said the finance ministry had begun discussions on bringing digital gold under joint RBI and SEBI oversight, possibly with full physical backing and audit requirements. No draft rule or notification had been issued as of 13 October 2026. Until something is notified, treat digital gold as unregulated. How is digital gold taxed? Digital gold is taxed like physical gold. Gains on units held more than 24 months are long-term and taxed at 12.5% without indexation; shorter holdings are taxed at your slab rate. The 3% GST you paid forms part of your cost. Our full guide to tax on gold in India (/insights/tax-on-gold-india) compares every form with examples. What should you do if you already hold digital gold? There is no need to panic-sell. The warning is about regulation, not a sign that any particular seller has failed. But it is a good moment to tidy up. What to do with existing digital gold after the SEBI warning: check, document, decide, switch Check who backs your gold: the app should name the bullion company and trustee. Save your records: download purchase history for cost and holding period. Weigh the tax: if your holding is close to 24 months, waiting may move the gain to the 12.5% rate. Consider delivery only if you want metal: coin delivery adds making and delivery charges. Redirect new money: start a gold fund SIP or buy a gold ETF for future purchases. Keep total gold, including jewellery, within a sensible share of your portfolio; many planners suggest 5-15%. See how much commodity exposure you should have (/insights/commodity-allocation-portfolio-india) , and if you are buying for the festive season, our Dhanteras 2026 gold buying guide (/insights/dhanteras-2026-gold-buying-guide) . Related reading Dhanteras 2026 gold buying guide (/insights/dhanteras-2026-gold-buying-guide) Tax on gold in India 2026 (/insights/tax-on-gold-india) SGBs discontinued: the alternatives (/insights/sovereign-gold-bonds-discontinued-alternatives) Investment scams in 2026 (/insights/investment-scams-india-2026) Gold vs silver (/insights/gold-vs-silver-investment-india) Frequently Asked Questions Why did SEBI warn investors about digital gold? SEBI noticed online platforms promoting digital gold as an alternative to physical gold. On 8 November 2025 it clarified that these products are neither notified securities nor regulated commodity derivatives, so they fall outside its oversight. It warned of counterparty and operational risks and said securities-market investor protection does not apply to them. Is digital gold safe in 2026? Digital gold from established sellers is usually backed by vaulted metal under a trustee arrangement, but no regulator supervises the product. Your safety depends on the seller, vault and trustee arrangements working as promised, and on the app continuing to operate. If something fails, there is no SEBI complaint route. Regulated alternatives reduce these risks. Is digital gold regulated by RBI? No. Neither RBI nor SEBI regulates digital gold as an investment product as of October 2026. Media reports in September 2026 said the finance ministry was discussing joint RBI-SEBI oversight, but no rules had been notified. Until then, it remains a commercial purchase governed by the seller's terms and consumer law. What is the best alternative to digital gold? For small, regular amounts without a demat account, a gold fund of funds SIP is the closest regulated substitute. With a demat account, gold ETFs offer low costs and exchange liquidity. Electronic Gold Receipts suit those who may want physical gold later. All three are SEBI-regulated and carry no GST on purchase. Should I sell my digital gold after the SEBI warning? Not necessarily. The warning concerns regulation, not the failure of any seller. Check who backs your holding, save your records and look at your holding period, since gains after 24 months are taxed at 12.5% rather than slab rate. Many investors simply stop adding and route new gold purchases to regulated options. How much does digital gold really cost? You pay 3% GST on each purchase, and platforms usually sell at a higher price than they buy back. In our illustration with a 3% spread, gold must rise about 6.2% before you break even. Storage beyond a free period, or delivery as coins, can add further charges, so read your platform's terms. Sources: Business Standard (PTI) on SEBI's caution, 8 Nov 2025 (https://www.business-standard.com/amp/markets/news/sebi-warns-against-investing-in-digital-gold-says-it-may-contain-risks-125110801211_1.html) ; AIR News on SEBI's warning (https://www.newsonair.gov.in/sebi-warns-investors-against-unregulated-digital-gold-schemes) ; Business Standard on SEBI chairman's remarks, 21 Nov 2025 (https://www.business-standard.com/markets/news/sebi-chief-tuhin-kanta-pandey-says-not-looking-to-regulate-digital-gold-125112100927_1.html) ; World Gold Council, India Q2 2026 (https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-india-focus-q2-2026) ; AIR News on NSE's EGR launch (https://newsonair.gov.in/nse-launches-electronic-gold-receipts-to-formalise-gold-market/) ; Business Standard on gold ETF flows (https://www.business-standard.com/markets/news/gold-etf-inflows-hit-7-month-high-in-sept-despite-5-fall-in-bullion-126101200525_1.html) ; Income Tax Department, section 197 (https://www.incometaxindia.gov.in/w/section-197-78) . Worked examples are Money n Wealth calculations. Want to move your gold savings into a regulated route? The right switch depends on your tax position and how much gold you already own. Talk to Money n Wealth (/contact) for a free portfolio review. This article is for general educational purposes only and does not constitute financial advice. Figures and examples are illustrative. Please consult a qualified financial adviser for guidance specific to your situation. Money n Wealth (Predics Fintech Services Pvt Ltd) is an AMFI-registered Mutual Fund Distributor (ARN-121995) and APMI-registered PMS Distributor (APRN07444); it is not a SEBI-registered investment adviser and may earn distribution commission on investments made through it.
Frequently Asked Questions
Why did SEBI warn investors about digital gold?
SEBI noticed online platforms promoting digital gold as an alternative to physical gold. On 8 November 2025 it clarified that these products are neither notified securities nor regulated commodity derivatives, so they fall outside its oversight. It warned of counterparty and operational risks and said securities-market investor protection does not apply to them.
Is digital gold safe in 2026?
Digital gold from established sellers is usually backed by vaulted metal under a trustee arrangement, but no regulator supervises the product. Your safety depends on the seller, vault and trustee arrangements working as promised, and on the app continuing to operate. If something fails, there is no SEBI complaint route. Regulated alternatives reduce these risks.
Is digital gold regulated by RBI?
No. Neither RBI nor SEBI regulates digital gold as an investment product as of October 2026. Media reports in September 2026 said the finance ministry was discussing joint RBI-SEBI oversight, but no rules had been notified. Until then, it remains a commercial purchase governed by the seller's terms and consumer law.
What is the best alternative to digital gold?
For small, regular amounts without a demat account, a gold fund of funds SIP is the closest regulated substitute. With a demat account, gold ETFs offer low costs and exchange liquidity. Electronic Gold Receipts suit those who may want physical gold later. All three are SEBI-regulated and carry no GST on purchase.
Should I sell my digital gold after the SEBI warning?
Not necessarily. The warning concerns regulation, not the failure of any seller. Check who backs your holding, save your records and look at your holding period, since gains after 24 months are taxed at 12.5% rather than slab rate. Many investors simply stop adding and route new gold purchases to regulated options.
How much does digital gold really cost?
You pay 3% GST on each purchase, and platforms usually sell at a higher price than they buy back. In our illustration with a 3% spread, gold must rise about 6.2% before you break even. Storage beyond a free period, or delivery as coins, can add further charges, so read your platform's terms.
Want to move your gold savings into a regulated route?
The right switch depends on your tax position and how much gold you already own. Talk to Money n Wealth for a free portfolio review.
