Digital gold emerges as a new way to buy gold in India. Digital gold is a fintech product allowing small denomination of gold purchases with digital payment modes like Paytm PhonePe and Google Pay (GPay). The platforms claim to back the digital investment with physical gold stored in a secure vault.
In a November 8, 2025, advisory, the Securities and Exchange Board of India (SEBI) cautioned the public about the risks associated with investing in unregulated "Digital Gold" offered by many online platforms. The timely warning comes due to a regulatory “vacuum” cautioning investors with due diligence on the credibility of the platform, verify audit arrangements, and confirm that the gold is held with independent, third-party custodians. They need to vouch for platform transparency regarding vaulting and backing arrangements ensuring clear allocation record exists.
SEBI has warned the investors about the risks of the unregulated “Digital Gold” products stating that these are neither notified as securities nor regulated as commodity derivatives. Its operated entirely outside the purview of SEBI and not under their jurisdiction. There are no remedial investor protection, monitoring, approvals, compensation fund or complaint redressal system.
Digital gold market has continued to see significant growth in India due to its convenience and accessibility through fintech apps. As per estimates of the World Gold Council (WGC) and “SafeGold” digital platform provider, in India, approximately 10% or Rs.14000 Crores of gold investments were made thru digital gold in 2024 out of total gold investments of roughly Rs.1.5 lakh crores. UPI transactions for digital gold has shot up 377% in 16 months with 99.77 million transactions in August 2025.
As per SEBI, safer alternatives are GOLD ETFs, Electronic Gold Receipts traded on stock exchange and Derivatives products, which come under their supervision, advising to use registered brokers or mutual fund platforms.
Reputable digital gold providers hire independent auditors to confirm that the amount of physical gold in their secured vaults matches the digital gold units sold to investors. The audit includes physical inspection and purity assessment using electronic testing and calibrated scales to confirm the quality (karat and fineness) and weight of the gold bars and coins. They publish audit reports of the transparent record-keeping confirming the gold holdings.
Storage of the physical gold in insured vaults is managed by trusted custodians. Providers often are seen partnering with few entities like MMTC-PAMP, SafeGold, Augmont or Brinks to name a few. Gold is held in an allocated manner belonging to the investor. Investors receive an invoice and a digital certificate or transaction record confirming their ownership of a specific quantity of gold.
The ability to sell digital gold (liquidity) is entirely dependent on the platform's buy-back policy and its own financial stability. During a widespread liquidity crunch or panic, a platform might delay redemptions, offer unfavorable pricing, or even temporarily suspend buybacks, trapping investor funds.
Due to lack of regulatory oversight, investors are exposed to the counterparty risks, operational issues with limited investor protection and without any legal recourse during the exit process.
When liquidating digital gold, challenges are about the liquidating process, hidden charges, limited holding period and counter-party failures. The buy-sell spread (Spread Cost) charged by digital gold providers, which covers costs like storage and insurance, impacts the final liquidation value.
If any regulatory measure were to be implemented, the questionable grey area is the physical gold backing in the vault storage against the digitally issued units. This is seen as the weak spot in the digital gold offerings needing a protection to the investors.
Digital Gold (If regulated) offers one of the innovative approach of investment. It caters to investors seeking to hold in smaller denominations, short term needs, liquidity and convenience. Without the regulatory backing it’s crucial that the investors choose a reputed and transparent platform that clearly discloses its vaulting, audit, and redemption arrangements.
Digital gold with strong audit and vault management practices is a good option for those prioritizing convenience, flexibility, and small-ticket investments over the short-to-medium term. However, due to the lack of a formal regulatory safety net, it may not be the ideal choice for large, long-term investments. The ultimate investor protection mechanisms are limited.
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