Digital Gold

**Shuchi Agrawal 

Despite the development of countless novel financial instruments, gold has remained central to the financial system, as it continues to be a universally accepted safe haven against volatility.  In this context, the meteoric rise of digital gold, especially in the recent times, is unsurprising. As per the World Gold Council, Indian investors purchased over 12 tonnes of digital gold between January and December 2025. A considerable part of this momentum is being driven by younger investors who are using digital payment platforms to buy digital gold. However, the growing popularity of digital gold is a cause for concern as it is an unregulated asset class. 

Before going further, it is imperative to clarify the exact nature of the asset. Digital gold is a financial instrument the value of which is tied to the value of gold. It is a technological representation of its underlying asset, physical gold. To further explain, offerings of digital gold are accompanied by declarations that an investment in digital gold gives the investor ownership over physical gold commensurate with the investment. This physical gold is stored in a vault and once the investment reaches a certain pre-decided threshold, the investor may claim possession of the physical gold under their ownership or sell it at market value. 

It presents two key benefits which explain its allure: first, it allows investors to invest in gold digitally, and hence offers convenience; and, second, it allows investments of nominal value, through which the investors may own fractional parts of gold (which is not possible for physical gold). Hence, the model of digital gold is built around offering increased accessibility to a traditional asset. This has majorly contributed to its popularity among younger demographics. 

However, digital gold is an unregulated asset. In November, 2025, the Securities and Exchange Board of India (“SEBI”) had published a press release clarifying that digital gold is outside its regulatory purview and may pose counterparty and operational risks for the investors. However, the discussions around the regulatory status of digital gold are not new. Over a decade ago, the Metals and Minerals Trading Corporation of India Limited had requested informal guidance from SEBI on whether digital gold would be considered a collective investment scheme and hence governed by SEBI. In response, SEBI had clarified that the nature of and the business model pertaining to digital gold was beyond the purview of SEBI. Hence, the silence of SEBI on the digital gold question is not an oversight, but a deliberate jurisdictional boundary. This boundary may be based on the premise that expanding SEBI’s domain to include digital gold would inadvertently, make it oversee the physical retail commerce space.

No other financial sector regulator currently oversees digital gold, either. This has created a regulatory vacuum surrounding digital gold. This means that there are no express guidelines, directions or instructions on the operations linked with digital gold and no clear, dedicated dispute resolution mechanisms. Accordingly, investments in digital gold do not have regulatory protection making them susceptible to scams and operational vulnerabilities.  

For instance, earlier this year, a man was defrauded of over INR 10.55 lakhs in a digital gold scam. The investor had invested small sums of money in tranches in digital gold and the platform used by him continued to reflect enviable returns. However, at the time of withdrawal of his investment, the transaction was not processed and the offerors of digital gold absconded. Further, almost a month ago, another similar scam was undertaken where a retiree lost over INR 56.8 lakhs after falling victim to an online investment fraud involving fake digital gold. Such instances have undermined the credibility of providers of digital gold. 

There have been calls for a regulatory regime to govern digital gold in order to safeguard investors while preserving innovation in gold-based financial products. Remarkably, digital gold platforms have been demanding regulatory oversight and have very recently come together to form a self-regulatory organization, namely the Digital Precious Metals Assurance Council of India (“DPMACI”). The DPMACI aims to promote transparency in processes, support gold purity standards, and perhaps, most importantly, looks to engage with regulators to facilitate the introduction of industry regulation and a uniform code of conduct for sellers and distributors alike. 

However, there is a pronounced hesitation on the part of the regulators with respect to bringing digital gold under their regulatory oversight and in turn, granting it institutional legitimacy. In part, this scepticism may be rooted in concerns regarding systemic financial stability. Regulating digital gold would require the regulator to ensure the proper functioning of physical vaults which are not bound by any statutory liquidity ratios or capital adequacy requirements. Furthermore, regulating digital gold without a legislative overhaul may create a moral hazard where investors may assume a sovereign guarantee to exist. 

The push-back against digital gold is most directly evident in the National Stock Exchange’s (NSE) recent launch of Electronic Gold Receipts (EGRs) as a new segment. EGRs are dematerialised securities representing ownership of physical gold, securely stored in SEBI accredited vaults and held electronically through depositories. As per the NSE, the EGRs have been offered in a bid to create a more transparent and efficient price discovery mechanism for gold. It is important to note that the BSE India has been offering EGRs since 2022. There are several, unmissable parallels between EGRs and digital gold. Both kinds of assets offer digital ownership of gold, and are backed by physical gold that is stored in vaults. Hence, it appears that EGRs may emerge as a regulated alternative that could compete with digital gold.

The lustre of digital gold taps into not only the hope to generate wealth but also an emotional satisfaction of owning gold, a traditionally valued commodity. Whether EGRs will attract investors away from digital gold remains uncertain and will depend on factors such as liquidity, ease of access, broker integration, and investor awareness. Additionally, to ensure that EGRs emerge as the preferred method of investing in gold, the regulators and stock exchanges will have to match the speed of fintech companies in innovation and product offering over time.

**Shuchi Agrawal is a Consultant at the National Institute of Public Finance and Policy. 

**Disclaimer: The views expressed in this blog do not necessarily align with the views of the Vidhi Centre for Legal Policy.