The digital gold industry in India is preparing to approach the union government if the Securities and Exchange Board of India (Sebi) continues to refuse regulating the rapidly growing sector. This development comes amid growing concerns about investor protection and market transparency.
Industry Seeks Regulatory Clarity
Two days after Sebi issued a warning to investors on November 8, 2025, stating that digital gold falls outside its regulatory ambit, the India Bullion and Jewellery Association (IBJA) sent a formal letter to the market regulator on November 10. The association, representing the apex body for all bullion and jewellery associations in India, requested Sebi to establish regulatory frameworks for digital gold products.
The IBJA letter clearly stated that various digital gold companies have expressed willingness to be regulated either through Sebi or any other regulator suggested by the authority. The association emphasized that while investor cautions are welcome, proper regulatory guidelines would benefit both investors and legitimate digital gold companies operating in the space.
Self-Regulation as Backup Plan
Surendra Mehta, national secretary at IBJA, revealed that if Sebi declines to regulate digital gold, the industry will create a self-regulatory organization (SRO) and seek approval from concerned government authorities. "We are interested in complete transparency," Mehta asserted, highlighting the industry's commitment to establishing credible oversight mechanisms.
The regulatory vacuum has already caused significant market impact. Financial technology platforms offering digital gold witnessed a nearly threefold increase in user withdrawals following Sebi's November warning. Financial advisors like Abhishek Kumar, founder of Sahaj Money, are now advising clients to avoid digital gold or shift existing exposures to legitimate, Sebi-regulated gold products through registered brokers.
Growing Market Amid Regulatory Uncertainty
Despite regulatory challenges, digital gold continues to gain popularity among Indian investors. Data from the National Payments Corporation of India reveals impressive growth, with UPI-based digital gold purchases surging from 50.93 million in January 2025 to 115.95 million in October 2025. In value terms, these purchases trebled to ₹2,290.4 crore during the same period.
According to Technopak Advisors, India's digital gold holdings reached 25 tonnes in FY25 and are estimated to double by FY30. This growth occurs despite the product operating in what experts describe as a regulatory vacuum, with neither Sebi nor the Reserve Bank of India providing oversight.
The absence of formal regulation creates multiple concerns, including limited recourse for investors if platforms face liquidity crises or collapse. There are also no mandatory verification processes for the physical gold backing users' holdings, including checks on purity, quantity, or vault management standards.
While established players like MMTC-PAMP maintain full physical backing and undergo regular independent audits, smaller providers may not offer the same level of assurance, increasing counterparty risk for investors. Pricing transparency remains another challenge, with rates varying across platforms due to differences in markups, transaction charges, and payment gateway fees.
Historical Context and Future Possibilities
This isn't the first time the digital gold industry has sought regulatory clarity. The most recent significant attempt occurred in 2021, when the National Stock Exchange instructed its members to stop offering digital gold following Sebi's observations about brokers facilitating such trades.
Digital gold providers responded by urging Sebi to establish a regulatory framework. Augmont, a digital gold provider, stated in September 2021 that "Sebi's involvement as a regulator would enhance investor confidence in this asset class." However, Sebi maintained its stance against regulating digital gold.
Legal experts suggest that the government possesses the power to classify digital gold as a security by issuing a notification under the Securities Contracts (Regulation) Act, 1956. Such a move would enable Sebi to regulate the issuance, trading, and custody of digital gold products.
The Electronic Gold Receipts (EGR) framework provides a precedent for how gold-linked products can be brought under formal regulation. In 2021, the government amended the SCRA to classify EGRs as securities, allowing Sebi to implement a comprehensive regulatory framework including standards for vault managers and investor protection mechanisms.
As the industry awaits Sebi's response to the latest representation, digital gold companies are reportedly considering approaching the Ministry of Corporate Affairs or the Ministry of Finance for regulatory assistance if the market regulator maintains its current position.
