A large quantity of gold bullion bars stacked high, often representing a national or institutional financial reserve or asset.
The Securities and Exchange Board of India has cautioned people investing in digital or e-gold products offered through online platforms. The regulator stated that several platforms currently providing digital gold options are operating outside the regulated framework, which could expose investors to financial risks.
Platforms Not Covered Under Regulatory Protection
Digital gold products are being marketed by some apps and websites as an alternative to physical gold. Investors deposit money and receive a claim for a certain quantity of gold said to be stored in vaults. According to the regulator, these digital products are neither classified as notified securities nor recognized as commodity derivatives. Therefore, no established investor protection mechanism applies to these offerings.
Traditional Community Trust-Based Models
In earlier years, jewellers used to run monthly investment plans where customers paid eleven instalments and the jeweller added the twelfth instalment. These transactions operated on mutual trust. Later, seeing the risks, the government discouraged such schemes.
Reliable Investment Options
The regulator has suggested safer investment alternatives linked to gold. These include gold exchange traded funds, exchange traded commodity derivative contracts, and electronic gold receipts. These instruments fall within recognized regulatory frameworks.
Digital Gold Availability and Scale in India
According to the World Gold Council, there are sixteen companies in India that provide digital gold products. These companies collectively maintain around five to six lakh active gold accounts.