SEBI warns investors over unregulated ‘digital gold’; Tanishq, MMTC, Augmont among key sellers

SEBI warns investors over unregulated ‘digital gold’; Tanishq, MMTC, Augmont among key sellers

The Securities and Exchange Board of India (SEBI) has issued a stern warning to investors regarding unregulated digital gold products. Digital gold, offered by platforms such as Tanishq, MMTC-PAMP, and Augmont, allows users to buy gold online in small amounts, with the gold stored physically in vaults. However, SEBI clarified that these digital gold products do not fall under its regulatory purview since they are neither classified as securities nor regulated as commodity derivatives.

Key Points from SEBI's Warning:

• Digital gold products operate completely outside SEBI’s regulation.

• Investors in digital gold are not protected by any investor protection mechanisms available in SEBI-regulated markets.

• These products pose significant counterparty and operational risks, including the risk of fraud, platform insolvency, or failure.

• SEBI indicated that in case of disputes or insolvencies, investors have limited or no legal recourse via the securities market.

• SEBI previously cautioned against digital gold in 2021 and reiterated that regulated alternatives exist like Gold ETFs, Sovereign Gold Bonds (SGBs), and Electronic Gold Receipts (EGRs).

• Despite SEBI's warning, these digital gold products remain popular due to ease of access and low investment minimums.

Implications:

• Unregulated digital gold providers such as MMTC-PAMP, SafeGold, and Augmont, along with their fintech partners, will face increased scrutiny and pressure to seek regulatory alignment.

• Investors are urged to exercise caution and consider safer, regulated alternatives backed by SEBI.

• The warning highlights the broader challenge of regulating emerging fintech products and protecting retail investors.

This advisory serves as a critical reminder to investors to verify the regulatory status of digital investment products and avoid unregulated exposures that carry high risks with no formal investor protection.