Big alert from SEBI on digital gold!
Sebi Digital Gold Warning: There is a different attachment to gold in India. But with changing technology, the way of investing in gold has also changed. In the last few years, especially among the youth, the trend of buying 'Digital Gold' has increased rapidly. Buying gold has become very easy with just a few clicks on many fintech apps and online platforms. But now the market regulatory body SEBI (Securities Exchange Board of India) has issued a big warning regarding this 'easy' investment. This statement of SEBI has worried millions of investors who have invested their money in digital gold. The biggest question is, is it time to panic? Should you sell your digital gold immediately, or would it be wise to hold on for now? Let us know what advice the experts are giving on this.
SEBI has recently issued an advisory cautioning investors against investing in digital gold/e-gold products. The regulator has clearly said that these products are completely out of the purview of SEBI. These are neither considered 'securities' nor are they regulated as commodity derivatives.
This simply means that if you buy gold through these platforms, then none of the Investor Protection Mechanism of SEBI applies to you. SEBI has clarified that by investing in these products, investors may have to bear various risks, such as failure of the platform (operational risk) or default of the company through which you have purchased gold (counterparty risk). If you are cheated or the company goes bankrupt, there is no regulatory framework in place to help you. Your entire capital may be at risk.
SEBI reminded investors that there are already safe and regulated options for investing in gold such as Gold ETFs and Electronic Gold Receipts (EGRs), which can be bought and sold on stock exchanges.
Experts say that SEBI's concern is absolutely justified. According to Amar Ranu of Anand Rathi Shares and Stock Brokers, the biggest threat is the lack of regulatory oversight. When a product is not regulated, there is no guarantee that the gold you have purchased is actually kept in the vault or not. Is it based on 1:1 backing? Will you get your gold back if the platform shuts down? The answers to these questions are not clear.
Sandeep Parwal of SPA Capital also expresses similar concerns. He says that investors often mistake digital gold for EGRs, whereas both are completely different. EGR is regulated by SEBI and guarantees the backing of physical gold, whereas there is no such arrangement in digital gold. The huge difference seen in the prices of physical gold and gold futures in recent times also points towards this hidden risk.
After this warning from SEBI, the biggest question in the minds of investors is what to do with the digital gold they have? Experts' opinions are divided on this.
Some experts are advising immediate selling. SEBI-registered investment advisor Abhishek Kumar's stance is very clear. He says, "If you have digital gold, exit immediately. Transfer it to a SEBI-regulated gold product. You may have to suffer a little loss, but it is better than the risk of losing 100% of your capital."
At the same time, some experts are calling it a step taken out of panic. Senco CEO Suvankar Sen believes that there is no need to panic or withdraw money immediately. According to him, the objective of SEBI is to make investors aware, not to discourage investment. He advises that investors should check from where they have purchased the gold. If the platform is trustworthy, transparent and backed by a reputed jeweller, they can continue their investment.
Raj Khosla of MyMoneyMantra.com and Amar Ranu of Anand Rathi both advise that there is no need to panic and sell immediately, but do re-assess your investments. If your investment is very large or you have bought from a non-transparent platform, it would be wise to gradually sell it and shift to SEBI-regulated products. But if this is a small part of your portfolio and you trust the platform, you can remain cautious.
