Kolkata: Indian investors, particularly younger buyers, boosted digital gold purchases to an estimated 12 tonnes during January-November this year, according to the World Gold Council (WGC), although demand slowed after the Securities and Exchange Board of India (Sebi) warned last month that the product was unregulated.
WGC’s estimate is based on data from National Payments Corporation of India (NPCI) on UPI transactions to purchase digital gold. NPCI published the data for the first time this year.
Based on Wednesday’s spot price in Mumbai, 12 tonnes of 24-karat gold is worth about ₹16,670 crore.
According to industry estimates, Indians bought digital gold equivalent to 8 tonnes in 2024.
New Framework in the Making
Digital gold lets consumers buy, sell and hold gold online without taking physical delivery and the purchase can start with as little as ₹1, making it popular with first-time investors and young buyers using apps and fintech platforms.
While the market regulator Sebi’s warning has made investors cautious, industry players are calling for a framework to regulate digital gold that they say is emerging as a transparent mechanism to invest in the safe haven asset.
“Gold continues to hold a deeply rooted place in Indian households as an important asset class and digital gold builds on this legacy by improving access through fractional ownership and transparent, market-linked pricing, while addressing concerns around storage and purity,” said Sachin Jain, WGC’s regional chief executive, India. “Digitalisation will be critical to ensuring that gold remains a trusted and relevant asset for Indian consumers,” he said.
Major players in India’s digital gold market include MMTC PAMP, Augmont and SafeGold. They store gold in vaults on behalf of customers, who can sell their holdings at any time through the platform, offering easy liquidity.
Self-regulation in the works
The surge in demand tapered off after Sebi in a November advisory said digital gold was not a regulated security by it or covered under existing commodity market rules, unlike gold exchange-traded funds and tradable electronic gold receipts. The regulator cautioned that investors should consider the risks before using such platforms.
The lack of regulation has led to the India Bullion & Jewellers Association (IBJA) setting up a self-regulatory organisation (SRO) for digital gold players. It is expected to begin onboarding members in January. The plan is to ensure that customers’ digital gold holdings are regularly audited and fully backed by physical gold stored in secure vaults.
The SRO will also set minimum net worth rules for companies offering digital gold.
“We are developing technology to onboard and regulate digital gold players. There will be auditing of all the digital gold players periodically. This will create confidence among buyers of digital gold and the market will deepen further,” IBJA national secretary Surendra Mehta said. The association expects to frame all the rules and regulations by the end March or early April next year.
Millennials and Gen Z account for two-thirds of digital gold buyers, reflecting a generational shift toward digital-first investing, industry executives said. “Post Sebi’s order, there was a lot of confusion in the market,” said a senior executive at a digital gold platform.
“All the stakeholders including the digital gold buyers have almost stopped buying gold digitally. We had to convince them to return to the platform,” he said.
