Digital gold Vs physical gold: Why Sebi’s clarity boosts consumer trust

The core clarification affirms a long-standing market practice: Digital Gold is not regulated as securities or commodity derivatives by SEBI, as it operates entirely outside the market regulator’s purview, similar to the direct sale of physical gold or jewellery

The recent clarification from the Securities and Exchange Board of India (SEBI) regarding Digital Gold is a positive and necessary move that helps define the boundaries of the digital ecosystem and significantly aids in educating customers on the nature of the product, according to experts.

SEBI recently issued a warning to investors regarding “digital gold” or e-gold products available online, stating that all such offerings operate outside the securities regulatory framework and hold significant risks for investors.

The core clarification affirms a long-standing market practice: Digital Gold is not regulated as securities or commodity derivatives by SEBI, as it operates entirely outside the market regulator’s purview, similar to the direct sale of physical gold or jewellery.

To understand the clarification, we must first define the product: Digital Gold is essentially 24-karat physical gold sold via digital channels in fractional units. Crucially, every unit of digital gold purchased by a consumer on platforms such as PhonePe, Gpay, Paytm, Jar, Amazon, Mobikwik, Tanishq, CaratLane is fully backed by an equivalent quantity of physical gold. This gold is stored in secure, bank-grade vaults and is fully insured.

Therefore, Digital Gold is simply a modern, digital mechanism for purchasing and saving physical gold, rather than being a virtual asset or a distinct financial investment product like a Gold ETF or a market-regulated derivative. The SEBI notification simply clarifies and affirms this distinction, said analysts.

The reliability of Digital Gold rests entirely on the integrity of the ecosystem partners. Gold sales on leading digital platforms (such as PhonePe, Paytm, GPay, Amazon, etc.) are powered by major industry leaders like MMTC-PAMP and SafeGold, both of whom hold authorized bullion trading licenses.These arrangements ensure the highest level of trust through globally benchmarked practices:

Every gram purchased is 100 per cent authentic, fully insured, and redeemable, backed by the seller's accredited operations. MMTC-PAMP, for example, is India’s only LBMA-accredited precious metals refiner.All gold holdings are physically allocated in the customer’s name. This metal is stored in world-class secured and insured vaults under the oversight of an independent trustee for additional customer protection, say experts.

Accounts are daily reconciled and independently verified through routine third-party audits, mirroring the rigour of self-regulatory frameworks adopted by sellers like MMTC-PAMP and SafeGold.