Mumbai: The Securities and Exchange Board of India (SEBI) has issued a warning to investors regarding “digital gold” or e-gold products available online, stating that all such offerings operate outside the securities regulatory framework and hold significant risks for investors. 

This situation may expose buyers to considerable counterparty and operational risks, as these products are neither classified as securities nor regulated as commodity derivatives.

"It has come to the notice of SEBI that some digital/online platforms are offering investors to invest in ‘Digital Gold/E-Gold Products’. Digital Gold is being marketed as an alternative for investment in physical gold," the market regulator said in a statement.

SEBI 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.

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They operate entirely outside the purview of SEBI. Such digital gold products may entail significant risks for investors and may expose investors to counterparty and operational risks, the statement said.

SEBI clarified that none of the investor protection mechanisms under securities market purview shall be available for investments in such digital gold or E-Gold products.

Various online platforms and jewellers are promoting digital gold with minimal investment options, starting at Rs 10 or Rs 100. They are also highlighting features like anytime buy/sell and the ability to redeem for physical jewellery.

SEBI emphasised that investment in gold can be made through regulated channels, including exchange-traded commodity derivatives, gold exchange-traded funds from mutual funds, and electronic gold receipts that can be traded on stock exchanges. These investments are facilitated by SEBI-registered intermediaries and are subject to the regulator's framework.

India’s gold exchange-traded funds saw $850 million in net inflows in October, taking the total to a record $3.05 billion -- the highest-ever for a single year, according to the World Gold Council data.