SEBI’s Digital Gold Caution: What the Regulator Is Really Signaling to Investors

Thu Dec 18 2025

Digital gold has emerged as one of the most widely used entry points into commodity investing for Indian retail investors. It offers fractional exposure, transparent pricing, and the convenience of online purchase without immediate concerns around storage and delivery.

However, a recent public caution issued by the Securities and Exchange Board of India (SEBI) makes one thing clear – convenience alone is no longer sufficient. The regulator is asking investors to look more closely at how digital gold platforms operate, not just what they offer.

What SEBI Has Said, In Its Own Words

In its November advisory, SEBI clarified that digital gold products are not SEBI-regulated securities, nor do they fall under any existing regulatory framework governing commodity derivatives.

More importantly, the regulator highlighted specific risks that investors should evaluate before engaging with digital gold platforms.

• Unclear ownership and legal structure where investors may hold contractual claims rather than direct, legally enforceable ownership of allocated gold.
• 1. Opaque vaulting and custody arrangements, with limited disclosure on storage, who control, and safeguards
• Absence of independent audits and oversight, increasing reliance on internal assurances rather than external verification.

SEBI’s message is measured but firm. Digital gold is not prohibited, but investors are expected to exercise caution and perform due-diligence.

Why This Matters for Investors

At its core, digital gold represents a promise – that the physical gold exists in a specific quantity, is securely held, and is legally owned by the investor.

If that promise is not supported by clear custody segregation, independent audits, and enforceable redemption rights, the risk shifts quietly from the platform to the investor.

As Sudeep Chatterjee, Chief Executive Officer at STOEX, has noted in recent discussions on the subject, “Gold has always been trusted in India because ownership was tangible and unambiguous. When gold becomes digital, that trust cannot be assumed; it must be rebuilt through robust legal structure, transparent custody, and independent verification. Technology enables wider access, but governance sustains confidence.”

This perspective underscores the intent behind SEBI’s advisory. The regulator is not questioning demand; It is questioning market discipline.

What Investors Should Check Before Buying Digital Gold

SEBI’s caution translates into practical due-diligence questions for investors evaluating digital gold offerings:

• Who operates the platform, and do they have experience with regulated investment products?
• Is the gold fully allocated, with each unit corresponding to identifiable physical holdings of commodity?
• Are vaulting partners disclosed, and are holdings subject to regular reporting and independent audits?
• Are redemption, delivery, and storage terms clearly documented and enforceable?Platforms that answer these questions transparently strengthen investor confidence. Platforms that avoid them increase risk.

How the Industry Is Responding

SEBI’s advisory has also triggered broader conversations within the industry about self-regulatory frameworks and baseline governance standards to improve transparency and investor protection for digital commodity products.

According to Sanjeev Vohra, Head of Sales at STOEX India: “Digital gold does not fail because of the underlying asset. It fails when governance is weak or poorly communicated. SEBI’s guidance pushes the industry towards higher operational discipline, which is ultimately in the best interest of investors and credible market participants.”

A Governance-First Model

Against this backdrop, platforms are reassessing how closely digital gold offerings mirror the safeguards of traditional commodity markets.

At STOEX, for instance, the approach has been to design its digital gold around allocated physical backing, clearly disclosed India-based vaulting through reputed partners, and a governance roadmap that includes trustee oversight and third-party audits. The objective is not speed or scale alone, but clarity around ownership and custody.

As Sudeep Chatterjee, Chief Executive Officer at STOEX, notes “Investor protection is not a feature; it is an operating principle. Our objective is to ensure that digital representations of physical assets meet the same standards of custody, auditability, and legal clarity that investors expect in regulated markets. Clear disclosure of redemption and fee structures is also central to this approach, ensuring investors understand how their holdings are managed throughout the lifecycle of the investment.

A Healthier Market Ahead

SEBI’s caution should not be viewed as a setback for digital gold. Instead, it marks a phase of progress.

As expectations around disclosure, custody, and oversight become clearer, digital gold platforms will increasingly be judged not by ease of purchase, but by the strength of their foundations.

Investors, in turn, will be better equipped to distinguish between convenience-driven offerings and those built for long-term trust.

Digital gold remains a powerful bridge between traditional assets and modern investing. SEBI’s message is straightforward: bridges that carry public trust must be built to last.

Source: https://www.india.com