SEBI’s Warning: Why Your “Tap-to-Buy” Gold Might Not Have Investor Protection

If you bought digital gold this Dhanteras with a simple tap on your favourite app, here’s something you should know.

On 8 November 2025, SEBI issued a public caution telling investors that many digital-gold products operate outside the securities framework - meaning the protections you expect in a regulated financial product don’t automatically apply here.

What SEBI Actually Said

SEBI’s note is simple: a lot of “digital gold” products sold through apps and platforms aren’t securities, so SEBI’s investor-protection rules don’t cover them. That means no structured disclosures, no guaranteed grievance mechanisms, and no clearly defined oversight on how your gold is stored or safeguarded.

Why now? Because India’s digital-gold adoption jumped through 2025 especially via UPI-linked fintech apps where small-ticket gold buying became common.

Why This Matters: Digital Gold ≠ Gold ETF ≠ SGB

Here’s a quick comparison to make the differences obvious.

Takeaway: Convenience ≠ Regulation. Digital gold is useful but it’s not the same legal product as ETFs or SGBs.

Five checks to run - do these before you buy more

Big app logo ≠ automatic safety. Many apps are only distributors - the vaulting, insurance, and audits are handled by a third party. Before you tap Buy, run these five quick checks.

1. Who actually holds the metal?

You aren’t buying gold from the app. Check the custodian/refiner name in the Terms & Conditions - common names in the ecosystem include vault partners and refiners. If the custodian name is missing or vague, treat it as a red flag.

2. Look for independent audits & vault reports

Providers who publish monthly audit or inventory certificates are more transparent. If you can’t find an audit trail, you’re relying on trust rather than verification.

3. Read the redemption rules

Delivery fees, minimum weights, minting charges and taxes can make “instant liquidity” expensive. Redemption terms vary widely - read the “Redeem / Delivery / Fees” sections before buying.

4. Understand what happens if the platform shuts down

Some platforms hold gold in a trustee/escrow arrangement (legal separation); others only offer a contractual promise. If the platform fails, the recovery path depends entirely on this structure - and the difference matters.

5. Don’t assume your app is your gold provider

Many fintechs and large apps act only as distributors or payment rails. Find the line that says “powered by” or “in partnership with” and note the partner’s name - that’s who actually manages custody.

Already hold digital gold? Do these 3 things today

1. Download and save purchase receipts - purchase confirmations, redemption proofs, and transaction screenshots.
2. Save the latest audit report published by the custodian (not the app).
3. Rebalance smartly - keep digital gold for small-ticket buys/gifts; use ETFs or SGBs for long-term allocations that need regulation-backed rules.

So… Should You Panic?

No - but you should act informed. Digital gold still has a role for micro-savings and gifting. The SEBI note is not a ban. It’s a reminder:

"Tap to buy ≠ tap to protect."

If you want regulated protection and clearer ownership rules, prefer Gold ETFs or SGBs. If you choose digital gold, accept the platform and custody counterparty risk and run the five checks above.

Key takeaways

• Digital gold = convenience; ETFs & SGBs = regulated protection.
• Before buying, confirm the custodian, audits, redemption rules and legal custody structure.
• Keep digital gold for small-ticket use; place longer-term gold allocations in ETFs/SGBs if you want explicit regulatory cover.

Disclaimer: This article is for educational purposes only and not a recommendation to buy or sell any product. Tax rules and product features change - review current regulations and product documents before investing. Finnovate Financial Services Pvt. Ltd. is a SEBI-registered RIA offering financial planning services.