SEBI Warning: The Hidden Risks in Your Digital Gold Investment
2 mins read 13th Nov 2025
The Unregulated Danger: Counterparty Risk
- No Investor Protection: Because these products are neither regulated as securities nor commodity derivatives, the strong investor protection mechanisms under SEBI, including grievance redressal and assured settlements, as enabled under its framework, do not apply. In case of default, shut down, or non-delivery of the physical gold that it purports to hold, there is no formal regulatory avenue for redress.
-
Trust and transparency: In many cases, there is a lack of independent audit or assurance that the gold you bought is indeed fully backed by physical metal sitting in a vault. The spreads on these platforms can be high as well, eating into your returns.In finance, this means an unregulated product relies totally on the word and financial health of a private company you transact with. This is a serious risk to which most investors are unknowingly exposed.
The Safer, Regulated Alternatives
Gold ETFs (Exchange Traded Funds)
Units are traded on a stock exchange like shares; backed by physical gold of high purity. You can invest as low as 200 in some of the gold ETFs.
Safety & Oversight : SEBI-regulated Units held in a Demat account. High transparency and liquidity.
Gold Mutual Funds
A Fund-of-Fund structure that invests in Gold ETFs. Allows investment via SIPs, often without a Demat account.
Safety & Oversight : SEBI-regulated Managed by an Asset Management Company (AMC) under strict rules.
Sovereign Gold Bonds (SGBs)
Government securities denominated in grams of gold. Offers interest on investment plus market-linked returns.
RBI-regulated, Government-backed Considered the safest option with no storage cost.