India's Digital Gold Surge Faces Regulatory Storm
Overview
Millions of Indians are flocking to buy digital gold via apps, a trend showing rapid growth. However, this digital savings tool operates outside India's financial regulatory framework, exposing investors to significant counterparty, operational, and cybersecurity risks without clear oversight or transparent pricing. Policymakers face pressure to close this widening gap between financial innovation and legal certainty.
Regulatory Void
Digital gold purchases are rapidly becoming a mainstream savings habit across India, with transaction values soaring. UPI-based digital gold purchases climbed from ₹50.9 million in January 2025 to ₹103.2 million by September 2025. Over the same period, the corresponding value nearly doubled, reaching ₹1,410 crore. This digital gold boom mirrors global trends, with tokenised gold products globally surpassing $2.5 billion.
Investor Perils
Despite its widespread adoption, digital gold remains largely outside India's financial regulatory architecture. The Securities and Exchange Board of India (SEBI) has clarified that these products are neither securities nor regulated commodity derivatives. This leaves investors exposed to substantial counterparty and operational risks, as these transactions are treated as private sales of goods without the protective layers of formal financial regulation.
Transparency Gaps
Platforms selling digital gold often operate without mandatory prudential requirements, disclosure obligations, or robust custody norms. Unlike regulated instruments like Gold ETFs or Sovereign Gold Bonds, digital gold pricing can be opaque, incorporating undisclosed GST, spreads, and markups. Crucially, many platforms lack minimum capital requirements, do not publish audit results, and offer minimal information on their security and storage arrangements.
Historical Parallels
This situation echoes past issues with unregulated gold savings schemes offered by jewelry brands. These schemes, promising bonuses and future redemption, often collapsed after causing significant distress to depositors. Regulators typically intervene only after consumers have suffered losses, a reactive approach that risks repeating.
The Path Forward
Arguments against stricter regulation suggest it could stifle innovation and reduce accessibility for small savers. However, regulated digital gold options already exist, demonstrating that innovation and investor safety can coexist. Establishing a clear regulatory framework is crucial to support the growth of retail participation in digital savings instruments and ensure that digital gold is backed by the certainty of law, not just metal in a vault.
