Younger investors in India have driven significant purchases of digital gold this year, acquiring an estimated 12 tonnes between January and November 2023. This data, compiled by the World Gold Council (WGC), highlights the format's growing appeal even as demand faced headwinds following a recent regulatory advisory from the Securities and Exchange Board of India (Sebi).
The Rise and Regulatory Pause of Digital Gold
The estimate is derived from transaction data published for the first time this year by the National Payments Corporation of India (NPCI) on Unified Payments Interface (UPI) transactions for digital gold. This marks a notable increase compared to industry estimates of around 8 tonnes bought in the previous year, 2024. Digital gold platforms allow users to buy, sell, and hold gold online in tiny amounts, starting from just Re 1, without handling physical metal.
This convenience has made it particularly popular among millennials and Gen Z, who account for nearly two-thirds of buyers, using fintech apps for easy access. However, the momentum saw a slowdown after Sebi issued an advisory in November 2023. The regulator cautioned that digital gold is not a regulated security and doesn't fall under existing commodity market rules, unlike Gold ETFs or Electronic Gold Receipts. It urged investors to carefully assess the risks.
Industry Response and Push for Self-Regulation
In response to the regulatory gap and to build consumer trust, the India Bullion & Jewellers Association (IBJA) is establishing a Self-Regulatory Organisation (SRO) for digital gold providers. According to IBJA national secretary Surendra Mehta, the SRO is expected to start onboarding members in January 2024, with rules finalized by end-March or early April 2024.
The SRO's key mandate will be to ensure that customers' digital gold holdings are fully backed by physical gold stored in vaults and are subject to regular audits. "We are developing technology to onboard and regulate digital gold players. This will create confidence among buyers and the market will deepen further," Mehta stated.
Building on a Legacy with Digital Access
Major platforms like MMTC PAMP, Augmont, and SafeGold store physical gold on behalf of customers, offering liquidity through digital channels. Industry leaders emphasize that digital gold builds on India's deep cultural affinity for the precious metal by improving access.
Sachin Jain, WGC's Regional CEO for India, noted, "Gold continues to hold a deeply rooted place in Indian households. Digital gold builds on this legacy by improving access through fractional ownership and transparent, market-linked pricing, while addressing concerns around storage and purity." He added that digitalisation is critical to ensuring gold remains a trusted and relevant asset for Indian consumers.
Despite the initial confusion post-Sebi's advisory, which a senior industry executive said caused many buyers to pause, the push for a clear regulatory framework is growing. The industry's move towards self-regulation aims to provide the needed security and transparency to sustain this digital-first shift in gold investment.
