{"id":172919,"date":"2025-12-04T08:13:59","date_gmt":"2025-12-04T13:13:59","guid":{"rendered":"https:\/\/old.alphastreet.com\/india\/?p=172919"},"modified":"2025-12-04T08:13:59","modified_gmt":"2025-12-04T13:13:59","slug":"how-digital-gold-became-indias-favourite-unregulated-investment","status":"publish","type":"post","link":"https:\/\/alphastreet.com\/india\/how-digital-gold-became-indias-favourite-unregulated-investment\/","title":{"rendered":"How Digital Gold Became India\u2019s Favourite Unregulated Investment"},"content":{"rendered":"

Digital gold has exploded in popularity across India, but few weeks back, SEBI finally said the quiet part out loud: it\u2019s completely unregulated. And surprisingly, that\u2019s not because regulators turned a blind eye but because digital gold simply doesn\u2019t fit into any of the boxes they oversee. Yet despite this gap, or perhaps because of it, the market ballooned into a \u20b913,800 crore phenomenon. So the real question is: how did a product sitting outside every rulebook become one of India\u2019s hottest investment trends? Lets dive deeper into the topic with the Alphastreet’s<\/a> Research Desk:<\/p>\n

 <\/p>\n

The Story<\/strong><\/h2>\n

SEBI\u2019s recent statement made one thing clear, digital gold is in a regulatory no man\u2019s land. It isn\u2019t a security like shares. It isn\u2019t a derivative like gold futures. And since it doesn\u2019t fall under banking, deposits, or payment products, RBI can\u2019t supervise it either. It\u2019s simply a digital representation of physical gold that platforms promise to store on your behalf. When you tap \u201cbuy\u201d, you\u2019re trusting the platform to actually hold that gold in a vault somewhere, fully backed and ready to redeem whenever you ask.<\/p>\n

But that trust is exactly the problem. Digital gold platforms operate like any private business. There\u2019s no legal requirement for them to publish audits, prove how much gold they hold, or even guarantee that customer balances are fully backed at all times. And if even one major platform were to fall short and people rushed to redeem, we could be staring at a crisis none of us saw coming.<\/p>\n

Yet despite this risk, digital gold didn\u2019t just survive, it flourished. And that takes us to the beginning of the story, and how this shiny idea took off in the first place.<\/p>\n

 <\/p>\n

\"Asset<\/p>\n

 <\/p>\n

The Spark That Started It<\/strong><\/h2>\n

The digital gold wave began in 2012 when Augmont, a major precious-metals company, spotted a massive gap in the Indian market. Back then, investors really had only two practical options: buy physical gold and deal with the hassle of storing it, or invest in gold ETFs through a demat account, which wasn\u2019t all that convenient or accessible, especially for small savers. Augmont flipped the script by introducing fractional digital gold. Suddenly, anyone could buy gold online for as little as \u20b91 while the company managed the vaulting. They even let customers pay through instalments. For a country emotionally attached to gold, the idea was irresistible.<\/p>\n

Before long, the space saw a heavyweight arrival. MMTC-PAMP, India\u2019s largest refiner and a name associated with purity entered the arena. They struck partnerships with Paytm<\/a>, PhonePe, Motilal Oswal, and others, giving digital gold massive distribution.<\/p>\n

 <\/p>\n

Why the Platforms Loved It<\/strong><\/h2>\n

Around 2017, the RBI tightened wallet regulations, making KYC mandatory for most digital transactions. It created friction for users and platforms alike. But digital gold purchases under \u20b92 lakh didn\u2019t require KYC. So wallet players realised something clever. They let users buy gold inside the app and they wouldn\u2019t need to complete KYC just to store small amounts of value. It became a workaround that kept customers engaged.<\/p>\n

But that wasn\u2019t the only benefit. Digital gold turned into a perfect onboarding hook. Once people got comfortable buying gold on an app, companies nudged them into mutual funds, stocks, and other financial products. That\u2019s why brokers like Groww, Upstox, and HDFC Securities also jumped in. And with every new platform came more users, more trust, and more momentum.<\/p>\n

By 2021, stockbrokers alone accounted for nearly 10\u201312% of the \u20b95,000 crore digital-gold market. And here\u2019s the statistic that made regulators uneasy, almost 85% of buyers never asked for physical gold. Meaning platforms could theoretically get away with holding less gold than they owed, and no one would notice for a long time. Without enforced audits, even an accidental mismatch could go undetected.<\/p>\n

 <\/p>\n

Where Regulation Hit a Dead End<\/strong><\/h2>\n

This was the moment regulators woke up to the scale of the problem. But by then it was too late, not to act, but to act meaningfully. No regulator had jurisdiction over digital gold because of how it was classified. It belonged to no one. SEBI couldn\u2019t regulate it. RBI couldn\u2019t regulate it. And since neither had the legal power to ban it outright, digital gold lived in a grey zone, not approved, not disallowed, just\u2026 there.<\/p>\n

So SEBI did the only thing it could: it told stockbrokers and registered advisers to stop offering or recommending digital gold. But the product itself? Still freely sold. Platforms capitalised on the ambiguity, much like jewellers do with traditional gold-saving schemes, trust-based, unregulated, technically legal.<\/p>\n

And that\u2019s how digital gold scaled into a \u20b913,800 crore industry with no formal oversight.<\/p>\n

 <\/p>\n

What This Means for You<\/strong><\/h2>\n

SEBI has now made its concerns very clear, if things go wrong, it has no authority to step in and protect investors. But that doesn\u2019t mean you hit the panic button. Experts suggest a gradual transition to regulated products like gold ETFs or Electronic Gold Receipts (EGRs). These not only offer tighter oversight but also tend to be more cost-efficient because digital gold usually comes loaded with storage fees, insurance, platform margins, and, of course, a 3% GST on every purchase. Which means gold prices could rise the next day and you might still end up selling at a loss.<\/p>\n

 <\/p>\n

\"Gold<\/p>\n

 <\/p>\n

So if you already own digital gold, you have a few choices: redeem it physically, sell and switch to ETFs or EGRs, or simply let your existing balance sit there if you trust the platform, though that trust is entirely your call. What you shouldn’t do is trigger panic exits. Ironically, panic is the only thing that could turn a hypothetical risk into a real one.<\/p>\n","protected":false},"excerpt":{"rendered":"

Digital gold has exploded in popularity across India, but few weeks back, SEBI finally said the quiet part out loud: it\u2019s completely unregulated. And surprisingly, that\u2019s not because regulators turned a blind eye but because digital gold simply doesn\u2019t fit into any of the boxes they oversee. Yet despite this gap, or perhaps because of […]<\/p>\n","protected":false},"author":1863,"featured_media":172925,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1941,5753],"tags":[14481,8889],"class_list":["post-172919","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-analysis","category-industrials","tag-digital-gold","tag-gold"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":173112,"url":"https:\/\/alphastreet.com\/india\/why-silver-exploded-in-2025\/","url_meta":{"origin":172919,"position":0},"title":"Why Silver Exploded in 2025","author":"Chirag Gupta","date":"January 5, 2026","format":false,"excerpt":"Imagine you\u2019ve been trading precious metals for nearly three decades. 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