What the Regulator Is Really Signaling to Investors

Digital gold has emerged as one of the most widely used entry points into commodity investing for Indian retail investors. It offers partial display, transparent pricing, and the convenience of online purchasing without immediate concerns about storage and delivery.

But a recent public alert issued by the Securities and Exchange Board of India (SEBI) makes one thing clear: convenience alone is no longer enough. The regulator is asking investors to take a closer look at how digital gold platforms work, not just what they offer.

What Did SEBI Say in Its Own Words?

In its advisory report in November, SEBI clarified that digital gold products are not securities regulated by SEBI nor do they fall under any existing regulatory framework governing commodity derivatives.

More importantly, the regulator highlighted certain risks that investors should consider before jumping into digital gold platforms.

• Unclear ownership and legal structure under which investors may have contractual claims rather than direct, legally enforceable ownership of the allocated gold.
• Opaque safe and storage arrangements with limited disclosure of storage and who controls and maintains it
• Lack of independent audit and oversight, increasing dependence on internal assurances rather than external verification.
• SEBI’s message is measured but firm. Digital gold is not prohibited, but investors are expected to be careful and exercise due diligence.

Why Is This Important For Investors?

Essentially, digital gold represents the promise that physical gold exists in a certain amount, is held securely, and legally belongs to the investor.

If this promise is not supported by clear custody separation, independent audits, and enforceable redemption rights, the risk silently passes from the platform to the investor.

As STOEX Chief Executive Sudeep Chatterjee noted in recent discussions on the subject, “Gold has always been trusted in India because ownership is tangible and clear. Once gold becomes digital, this trust cannot be assumed; it must be rebuilt through robust legal structure, transparent custody and independent verification. Technology enables wider access, but governance maintains trust.”

This perspective underlines the intent behind SEBI’s recommendations. The regulator does not question the request; It questions market discipline.

What Should Investors Check Before Buying Digital Gold?

SEBI’s warning translates into practical due diligence questions for investors evaluating digital gold offerings:

• Who operates the platform and do they have experience with regulated investment products?
• Is gold fully allocated to correspond to each unit’s identifiable physical commodity stocks?
• Are vault shareholders disclosed and are holdings subject to regular reporting and independent audits?
• Are the take-back, delivery and storage conditions clearly documented and enforceable?
• Platforms that answer these questions transparently strengthen investors’ trust. Platforms that avoid these increase risk.

How Is the Industry Responding?

SEBI’s recommendation has also triggered broader discussions in the industry on self-regulatory frameworks and basic governance standards to improve transparency and investor protection for digital commodity products.

According to Sanjeev Vohra, Sales Manager, STOEX India: “Digital gold does not fail because of the underlying asset. It fails when governance is poor or poorly communicated. SEBI’s guidance pushes the industry towards higher operational discipline, which is ultimately in the interest of investors and trusted market participants.”

Priority Governance Model

Against this backdrop, platforms are re-evaluating how closely digital gold offerings reflect the protections of traditional commodity markets.

At STOEX, for example, the approach was to design digital gold around a governance roadmap that included dedicated physical backing, a clearly disclosed India-based vault through recognized partners, and trustee oversight and third-party audits. The goal is not just speed or scale, but clarity around ownership and custody.

As STOEX Chief Executive Sudeep Chatterjee puts it, “Investor protection is not a feature; it is an operating principle. Our goal is to ensure that digital representations of physical assets meet the same standards of custody, auditability and legal clarity that investors expect in regulated markets. Clear disclosure of redemption and fee structures is also central to this approach, ensuring investors understand how their assets are managed throughout the lifecycle of the investment.”

A Healthier Market Is Ahead

SEBI’s warning should not be seen as a setback for digital gold. Instead, it marks a stage of progress.

As expectations around disclosure, custody and custody become clearer, digital gold platforms will increasingly be evaluated not on ease of acquisition but on the strength of their fundamentals. Investors will also be better equipped to distinguish between offers focused on convenience and those built for long-term trust.

Digital gold remains a powerful bridge between traditional assets and modern investment. SEBI’s message is clear: Bridges that carry public trust must be built to last.