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Digital gold may appear to be an easy and attractive investment tool, but its shine lurks risks. Taking SEBI’s warning seriously, investors should invest their money only in regulated and safe options.
Beware of Investing in Digital Gold
New Delhi: Digital gold has become a modern and easy investment method these days. The convenience of investing with just one rupee through mobile apps and online platforms has made it very popular among young and new investors. However, the Securities and Exchange Board of India (SEBI) has now advised investors to be cautious about investing in it.
Digital gold is a medium through which investors can purchase gold electronically. This gold is actually stored in secure vaults in the form of 24-carat pure physical gold, which is the responsibility of the platform provider. This method relieves investors of the hassles of owning physical gold such as security, storage, or purity verification.
Digital gold is available on most mobile apps and online portals, making investing in gold easy and quick.
SEBI warns investors against unregulated ‘Digital Gold’ sold via online platforms
SEBI recently warned that digital gold is not yet within the regulatory framework. This means it is neither classified as a recognized security nor a commodity derivative.
In contrast, investment products such as gold exchange-traded funds (ETFs), sovereign gold bonds (SGBs), and electronic gold receipts (EGRs) are controlled and regulated by SEBI.
The biggest risk for investors investing in digital gold is the lack of investor protection. SEBI states that if a digital gold platform goes bankrupt, commits fraud, or faces a technical glitch, investors have no guarantee of getting their money back.
Counterparty Risk: Investors may suffer losses if the platform goes bankrupt or fails to deliver.
Operational Risk: Problems related to gold storage, insurance, or company operations can prove detrimental to investors.
SEBI warns investors against unregulated ‘Digital Gold’ sold via online platforms
SEBI has clearly stated that if investors want a safe and regulated investment in gold, they should consider options like Gold ETFs or EGR instead of digital gold. These products trade on recognized stock exchanges and have all the regulatory provisions in place to protect investors.
Digital gold may appear to be an easy and attractive investment tool, but its shine lurks risks. Taking SEBI's warning seriously, investors should invest their money only in regulated and safe options.
