Page 30 - Bullion World Volume 04 Issue 07 July 2023

Bullion World | Volume 3 | Issue 7 | July 2023

The Future of Digital Gold in India:

Opportunities & Challenges

Mr Anirudh Pramod Menon, Director - FINMET Technologies Pvt Ltd

Digital gold, also known as e-gold, and more convenient for investors
is a digital form of investment that to buy and sell gold digitally, further
allows individuals to invest in gold driving the growth of digital gold in
electronically. It enables investors to India. This move could potentially
buy and sell gold without physically increase the appeal of digital gold as
owning or storing it. Digital gold is a viable investment option, especially
backed by physical gold reserves since physical gold remains a
and investors can buy digital gold in preferred investment tool for Indians.
small denominations, which makes
it affordable for individual investors It appears that jewellers are not
who may not have the resources just keeping up with the digital age
to invest in the physical metal. but also using it to their advantage.
While gold has long been a popular Although the convenience of buying
investment choice among Indians, has had an impact on the growth
digital gold seems to slowly gain of digital gold, consumers are still
its footing as a legitimate choice of wary of these unregulated providers. Mr Anirudh Pramod Menon
investment. The Reserve Bank of India (RBI)
has expressed concerns over the individual investors and commercial
A recent survey by Axis My India lack of regulation in the digital gold participants along the value chain
on India Investment Behavior1, market and has warned investors to buy and sell gold, including
confirms this by shedding some light to be cautious when investing in importers, banks, refiners, bullion
into the budding digital gold market. this asset class. SEBI has restricted traders, jewellery manufacturers,
According to the survey, 65% of regulated entities from offering digital and retailers. The National Stock
Indians invest a part of their income, gold as it does not fall under the Exchange (NSE) in India is looking
with more than 53% choosing gold definition of a security, as per the to introduce electronic gold receipts
as an investment tool. However, Securities Contract (Regulation) (EGRs) on its platform, following
the survey revealed that only 10% act, 1956 (SCRA)3 . However, SEBI the Bombay Stock Exchange (BSE)
of people have invested in digital has approved a product very similar which launched EGR trading in
gold, while 35% showed awareness to digital gold… Electronic Gold October 2021 .
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towards it. Receipts.
As the popularity of digital gold
The report further revealed that EGRs are depository gold receipts continues to grow in India, it's
only 15% of youngsters would that can be traded like stocks clear that this asset class has the
invest in digital gold. Trust seems and are held in Demat accounts. potential to revolutionize the way
to be the most important factor The trading exchange holds the people invest in gold. With increasing
when it comes to buying gold with underlying value of the receipt in awareness and adoption of digital
54% of people saying they would physical gold in a vault. EGRs, like modes of investment, the future of
consider investing in digital gold if a digital gold can be converted into digital gold in India certainly appears
government-backed company made physical gold when needed. EGR’s promising. However, as with any
the process simpler. Companies do however differ from digital gold, emerging market, there are risks and
such as Paytm and PhonePe have as EGRs can only be bought on challenges that must be addressed.
emerged as major players in the exchanges whereas investors can It will be fascinating to see how the
Indian digital payments market, buy digital gold on a plethora of industry evolves and matures over
with over 100 million users daily. platforms. Digital gold is also treated the next few years, and whether the
Digital gold providers MMTC PAMP as a commodity for tax purposes, government takes steps to regulate
and Safegold have partnered with and investors are liable to pay capital and support the growth of this new
payment providers such as PhonePe gains tax on any profits earned from asset class. Only time will tell how
to offer users the ability to purchase trading or selling digital 3. digital gold will shape the future of
and store digital gold on 1 India's investment landscape.
The introduction of EGRs on the NSE
These platforms have made it easier (National Stock Exchange) will allow

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