SEBI warns investors against investing in digital gold. Said that these products are outside the regulatory framework of SEBI and pose high risks to investors. Choose only regulated gold ETFs and electronic gold receipts for safe investments.
New Delhi. If you are thinking of investing in digital gold or e-gold, SEBI has issued a warning for you. The market regulator has said that digital gold products are outside the regulatory framework of SEBI and investing in them can be risky. These products are being shown as an easy alternative to physical gold, but investors can face many types of risks in them. SEBI clarified that invest only in safe options like regulated gold ETFs, exchange-traded commodity derivatives and electronic gold receipts.
Why is investing in digital gold risky?
SEBI said that digital gold or e-gold products are neither notified as securities nor regulated as commodity derivatives. This means that they are completely out of the purview of SEBI. Your money is not safe in such investments and investors can suffer losses at any time.
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What are the threats to investors?
Investors investing in digital gold may face counterparty risk and operational risk. Meaning, if the digital platform closes down or is proven to be fake, investors can lose their money. SEBI clearly said that the security measures applicable to regulated securities will not apply to digital gold.
What are safe options?
SEBI suggested investors to use only regulated instruments for safe investment in gold. These include:
- Gold ETFs offered by mutual funds
- Exchange-Traded Commodity Derivative Contracts
- Electronic Gold Receipts (EGRs) traded on stock exchanges
- All these come under the regulatory framework of SEBI and ensure the protection of investors.
What is the difference between digital gold vs physical gold?
While investing in physical gold, the investor has complete control, whereas digital gold is shown only on online platforms. This requires trust that the platform is investing in genuine gold. SEBI has warned that online platforms may show misleading options to investors.
What should investors do?
- Invest only in SEBI regulated Gold ETFs or EGR.
- Avoid investing in digital gold or e-gold.
- If an online platform offers investment, then definitely check its credibility.