Investor alert: Sebi flags digital gold risks; should you trust unregulated platforms?

Markets regulator Sebi has warned investors against putting money into digital or e-gold products, cautioning that such instruments fall outside its regulatory framework and carry significant risks, PTI reported.The advisory follows Sebi’s observation that several online platforms have been promoting “digital gold” or “e-gold” as a convenient alternative to physical gold, without disclosing that these are unregulated products.“In this context, it is informed that such digital gold products are different from Sebi-regulated gold products as they are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of Sebi,” the regulator said in a statement.Sebi warned that these offerings “may entail significant risks for investors and may expose investors to counterparty and operational risks.” It also clarified that investor protection mechanisms applicable to regulated securities do not extend to such unregulated schemes.The regulator advised that investors seeking exposure to gold should use Sebi-regulated instruments, including Gold Exchange Traded Funds (ETFs) offered by mutual funds, exchange-traded commodity derivatives, and Electronic Gold Receipts (EGRs) that are tradable on recognised stock exchanges.“All investments in Sebi-regulated gold products must be made through registered intermediaries and are governed by the regulatory framework prescribed by the regulator,” Sebi said.The advisory is aimed at protecting retail investors from unregulated entities that offer gold-backed digital investment options without sufficient safeguards, leaving investors vulnerable to fraud or default.