GREENVISSAGE EXPLAINS: What made digital gold POPULAR and why it is a risk?
Gold has always held a special place in Indian hearts. For decades, owning physical gold, whether as jewellery, coins or bars, was considered a mark of security, tradition and savings. But over the last several years, a new way to invest in gold has quietly taken root: buying and holding digital gold. It’s often pitched as an easy, affordable, and frictionless path to owning gold, especially for those who don’t want to worry about storage or purity. And yet, for all its convenience, digital gold remains outside the formal regulatory framework. So how did it end up as a favourite investment choice for many? Put simply, digital gold refers to a product that allows individuals to buy and store gold digitally, through mobile apps or online platforms. When you buy digital gold, the platform claims to purchase and hold a corresponding amount of physical gold, often 24K, in secure vaults. What you own is a digital record or certificate indicating how much gold you hold. You may even have the option to convert it into physical gold or sell it back to the provider. Fractional ownership removes a massive barrier in traditional gold buying. Instead of needing a lump sum to buy a coin or bar, anyone with modest savings can begin building a gold portfolio. Add to that the convenience: no need to visit a jeweller, no questions about purity or paperwork, no worries about storing jewellery or bars at home. The platform handles vaulting, storage, insurance, and, often, claims to offer instant liquidity. These features make digital gold uniquely suited to modern, app-savvy Indians, especially younger investors or those with modest incomes who nonetheless want exposure to the traditional security of gold.
Historically, investing in gold meant either buying physical gold or going via regulated financial instruments like gold ETFs, which required a demat account, certain minimum investment thresholds, and some financial sophistication. Digital gold removed all these friction points. With just a few taps on a phone, even someone with ₹100 could own gold. That democratised gold ownership in a way few had anticipated. Digital gold promised the best of both worlds: the traditional value of gold, along with the digital-age convenience of easy buying, selling, and tracking. For investors who didn’t want to deal with lockers or home safes or worry about purity and authenticity, it was a compelling option. Many considered it a set-and-forget savings tool, a path to slowly accumulate gold over time. Gold has long held cultural importance in India, as a store of value, a hedge, a symbol of marriage, prosperity and security. Digital gold allowed a new generation to participate in that tradition, even if they lacked the means to buy large quantities. For many, representing ownership of a few grams of gold, even digitally, felt close enough to the real thing. Because you could buy, sell or redeem at will, digital gold offered a kind of liquidity that traditional gold investments struggled with. Need quick cash? Sell. Want to add more? Tap to buy. There was no need to wait for a jewellery store visit or deal with paperwork.
Recent developments have shone a harsh light on what many skipped over: the fact that digital gold exists in a regulatory no man’s land. As of November 2025, the Securities and Exchange Board of India (SEBI) issued a public advisory warning investors about the risks of digital gold/e-gold products. According to SEBI, digital gold does not qualify as a security under existing laws, nor does it fit into regulated categories like commodity derivatives. That means it does not fall under SEBI’s purview or legal protection. The implications are serious. If the platform holding your gold defaults, mismanages assets, or, worse, becomes insolvent, there may be no legal guarantee that investors like you get their money or gold back. There’s no standard audit requirement, no mandated disclosure of vault holdings, and no regulated grievance or claims mechanism. In short, you are trusting the platform and its vault partner at your own risk.
Digital gold grew quietly, quietly enough to avoid immediate regulatory scrutiny. It didn’t ask for a public sale via the stock markets. It didn’t market itself as a security or derivative. It simply offered a service: store gold for customers, let them buy and sell fractions, and maybe deliver physical gold on demand. Because it didn’t fit neatly into existing categories, neither deposit, security, commodity derivative, nor payment instrument, regulators effectively had no rulebook to apply. That regulatory ambiguity gave platforms a big head start: they could scale, reach millions of users, and accumulate huge amounts of claimed holdings without being subject to audits, reserve requirements, or disclosure norms. So digital gold thrived in grey space, much like how informal gold-saving schemes did in the past.