Should you invest in digital gold products? SEBI clarifies
What's the story
The Securities and Exchange Board of India (SEBI) has issued a warning about the potential risks associated with investing in digital gold products. The market regulator noted that these products are offered by several online platforms but are not regulated under the securities market framework. This means they could pose significant risks for investors, including counterparty and operational risks.
Regulatory clarification
Digital gold products different from regulated ones
SEBI clarified that digital gold products are different from its regulated gold products. The regulator said these digital offerings are neither notified as securities nor regulated as commodity derivatives, thus operating entirely outside its purview.
Protection gap
Investor protection mechanisms not applicable
SEBI also warned that its investor protection mechanisms are not applicable to investments in such unregulated digital gold products. The regulator has enabled investments in gold and related instruments through various regulated products such as exchange-traded commodity derivative contracts, Gold Exchange Traded Funds (ETFs) offered by mutual funds, and Electronic Gold Receipts (EGRs) tradeable on stock exchanges.
Market trend
Popular brands offering digital gold products
The warning comes as a number of online platforms have started offering digital gold products amid growing investor interest. These include popular brands such as Tanishq, MMTC PAMP, Aditya Birla Capital, Caratlane, PhonePe, and Shriram Finance. While these are well-established brands unlikely to default on their commitments, customers investing in these unregulated products will not get any protections under securities regulation in case of default.