Sebi flags serious risks in digital gold purchases:Scripbox CEO advises 3-step safety plan – Here’s what you can do with your investment

The Securities and Exchange Board of India (Sebi) has issued a public advisory warning investors against buying “Digital Gold” or “E-Gold” products offered on various online platforms. The regulator clarified that these offerings do not fall under Sebi’s regulatory framework, unlike established and supervised gold investment options such as gold exchange-trade funds (ETFs), electronic gold receipts (EGRs), and exchange-traded commodity derivatives. ‘A Timely Caution,’ Says Scripbox CEO Atul Shinghal, founder and CEO of Scripbox, said the advisory should be seen as an important reminder about investor safety. According to him, digital gold lies outside Sebi’s oversight, which means investors do not enjoy the protections available in regulated products. Why Digital Gold Is Risky Digital gold lets users buy small quantities of gold online through apps or websites. Platforms claim to store equivalent physical gold in vaults and provide digital records to customers. However, Sebi has pointed out a key issue: Digital gold does not qualify as a security or a commodity derivative, nor does it fall under the Reserve Bank of India’s jurisdiction. As a result, no regulator oversees it. This raises concerns. These platforms operate like ordinary businesses, not regulated financial entities. Why Digital Gold Grew Despite Being Unregulated Although unregulated, digital gold became popular in India over the past decade: This led to widespread adoption long before regulators stepped in with warnings. What Should Existing Digital Gold Investors Do? In an interview with Bhaskar English, Shinghal recommends a cautious, step-by-step approach: 1. Review Your Current Holdings If digital gold forms a small share of your portfolio (under 1–2%) and is held on a reputable platform with clear custodial details, there is no need to sell immediately. But it is important to acknowledge the counterparty risk. 2. Prefer Regulated Options for Future Purchases For future investments, choose Sebi-regulated products such as: These offer transparency, regulatory oversight, and investor protection. 3. Consider a Gradual Exit if Exposure Is High If you feel uneasy about unregulated investments, or if your exposure is significant, you may opt for a phased exit and reinvest in regulated alternatives aligned with your risk profile. Conclusion Gold remains a valuable asset for diversification, but the investment vehicle matters as much as the asset itself. Sebi’s advisory underscores the importance of choosing regulated products that protect investors from operational and counterparty risks. Convenience should never come at the cost of security.