Digital gold has become a buzzword in the investment community, offering a simple and modern way to acquire gold. However, a recent advisory from the Securities and Exchange Board of India (Sebi) has highlighted significant risks associated with this seemingly convenient option.

Sebi’s Warning Raises Alarms

Issued on November 8, 2025, Sebi’s advisory has brought to light the unregulated nature of digital gold. The regulator pointed out that these digital platforms, despite their popularity, do not fall under its oversight or that of the Reserve Bank of India. This lack of supervision means that investors could face risks they’re unaware of when opting for digital gold.

Industry Expert’s Take

Abhishek Kumar, a Sebi-registered investment advisor, warns that this lack of regulation leaves investors vulnerable. He emphasizes that “If these platforms default or fail to deliver gold, investors would not have protection under Sebi’s jurisdiction.” His insights underline the importance of understanding the associated risks of trading digital gold.

The concerns primarily revolve around the potential lack of transparency and security. As digital gold is not yet classified as a security or commodity by Sebi, there is no regulatory body confirming whether the gold backing each purchase physically exists or is stored securely. Investors are essentially placing their trust in the companies offering these services, without any regulatory safety net.

What Makes Digital Gold Risky?

The absence of oversight can lead to uncertainties, such as counterparty and operational risks. According to Kumar, “Platforms might fail to deliver or reclaim redeemed gold, leaving you with potential losses.” Without independent checks, investors are relying on the good faith of unregulated entities, which is risky at best.

What Should Investors Consider?

With Sebi’s spotlight on digital gold, the debate about its safety is at the forefront. For those holding digital gold, moving towards regulated options like Gold ETFs (Exchange-Traded Funds) or Electronic Gold Receipts (EGRs) could be wise. Kumar suggests, “Shifting to Sebi-regulated products offers transparency and investor protection, which are crucial for secure investments.”

The Path Forward: Choosing Wisely

Digital gold owes its popularity to convenience, allowing investments as minimal as Rs 10 without the physical concerns of storage and theft. However, with convenience should come scrutiny. Sebi’s alert urges investors to prioritize safety over convenience, especially for long-term holdings.

A Balanced Approach

While digital gold remains a viable short-term choice, transferring major investments to Sebi-approved options such as gold ETFs and EGRs ensures adherence to legal frameworks and safety protocols. As stated in India Today, understanding regulations plays a crucial role in safeguarding your investments.

Digital gold’s allure is undeniable, but with Sebi’s insights, investors need to weigh risks thoughtfully and choose wisely for financial security.