The digital gold rush is surging at around 50% even as Sebi flags regulatory risks

Kolkata: Indian investors, especially younger buyers, have increased purchases of digital gold to an estimated 12 tonnes in the January-November period this year, according to the World Gold Council (WGC), although demand slowed after the Securities and Exchange Board of India (Sebi) warned last month that the product was unregulated. WGC’s estimate is based on data from the National Payments Corporation of India (NPCI) on UPI transactions to buy digital gold. NPCI published the data for the first time this year.

Based on Wednesday’s spot price in Mumbai, 12 tonnes of 24-carat gold is worth about ₹16,670 crore.According to industry estimates, Indians bought 8 tonnes of digital gold in 2024.

New framework in the making

Digital gold allows consumers to buy, sell and hold gold online without physical delivery. Purchases can start from as little as ₹1, making it popular among first-time investors and young buyers using apps and fintech platforms.

While the warning from market regulator Sebi has made investors cautious, industry players are calling for a framework to regulate digital gold, which they say is emerging as a transparent mechanism to invest in safe havens.

“Gold continues to have an entrenched place in Indian households as a key asset class and digital gold builds on this legacy by improving access through fractional ownership and transparent, market-based pricing, while addressing storage and purity concerns,” said Sachin Jain, Regional CEO of WGC, India. “Digitalization will be critical to ensure that gold remains a trusted and relevant asset for Indian consumers,” he said.

Major players in the Indian digital gold market include MMTC PAMP, Augmont and SafeGold. They store gold in vaults on behalf of customers, who can sell their assets at any time through the platform, providing easy liquidity.

Self-regulation in the making
The surge in demand subsided after Sebi said in a November advisory that digital gold is not a regulated security or covered by existing commodity market rules, unlike exchange-traded gold funds and tradable electronic gold certificates. The regulator warned that investors should consider the risks before using such platforms.

The lack of regulation has led to the India Bullion & Jewelers Association (IBJA) setting up a self-regulatory organization (SRO) for digital gold players. Member onboarding is expected to begin in January. The plan is to ensure that customers’ digital gold holdings are regularly monitored and fully backed by physical gold stored in secure vaults.

The SRO will also set minimum asset rules for companies offering digital gold.

“We are developing technology to onboard and regulate digital gold players. There will be a periodic audit of all digital gold players. This will create confidence among digital gold buyers and the market will further deepen,” IBJA National Secretary Surendra Mehta said. The association expects to have all rules and regulations finalized by the end of March or early April next year.

Millennials and Gen Z account for two-thirds of digital gold buyers, reflecting a generational shift toward digital-first investing, industry executives said. “After Sebi’s order, there was a lot of confusion in the market,” said a senior executive at a digital gold platform.

“All stakeholders, including digital gold buyers, have almost stopped buying gold digitally. We had to convince them to return to the platform,” he said.