SEBI warns investors to avoid unregulated digital gold schemes
The Securities and Exchange Board of India (SEBI) has issued a cautionary note to investors, advising them to stick to regulated gold investment channels. This comes amidst growing interest in gold as an investment, with India's gold ETFs witnessing significant inflows. However, SEBI warns against 'digital gold' or 'e-gold' products offered by online platforms and jewellers.
SEBI recommends investing in gold exchange-traded funds (ETFs), exchange-traded commodity derivatives, or electronic gold receipts (EGRs) traded on recognised stock exchanges. These options are regulated and offered by major financial institutions like BlackRock, State Street Global Advisors, and JPMorgan, which operate under regulatory supervision.
SEBI's warning highlights the risks associated with 'digital gold' products. These products are not regulated by SEBI and lack the investor safeguards available under securities market regulations. Investors in such products are exposed to substantial counterparty and operational risks due to the absence of established oversight mechanisms.
Investors are urged to consider only regulated gold investment channels for their safety and security. Despite the appeal of digital gold products, their lack of regulation and oversight makes them risky. Meanwhile, India's gold ETFs continue to attract significant investments, with net inflows of USD 850 million in October 2023, bringing the yearly total to a record $3.05 billion.
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