Investing in digital gold? This new regulation may put a damper on your step

Pranati Deva
Updated: 14 Dec 2021, 03:20 PM IST
TL;DR.

While not as popular as physical gold, the demand for digital was slowly rising. But this new Sebi regulation may become a hindrance to that. Let’s see what they propose

NSE has asked online brokers to stop selling digital gold.

NSE has asked online brokers to stop selling digital gold.

Investment in gold has been popular for ages. The yellow metal is considered one of the safest forms of investment much more than equity trading or mutual funds. Physical gold has been in demand for centuries, however, digital gold was slowly getting accepted.

However, market exchange NSE has asked online brokers to stop selling digital gold. So if I have been investing in digital gold or are planning to buy it might be a bit difficult going forward.

This comes after the market regulator Sebi declared digital gold sales a violation of the Securities Contracts (Regulation) Rules (SCCR) of 1957.

Digital gold is an online instrument that enables you to buy gold virtually without ever worrying about the physical aspects, purity, safety, etc. When buying digital gold, the seller has that amount of physical gold in a safe. The biggest advantage of this online tool was that there was no minimum purchase limit. You could buy digital gold worth 100 each month and the seller will keep the equivalent weight in physical gold. And whenever you want to redeem, you can convert it either to physical gold or sell it for cash.

However, the biggest flaw with this digital gold market was that it was not regulated. And since it does not come under the purview of SEBI, the market regulator does not want brokers (who are regulated by Sebi) selling it. They have asked them to stop selling digital gold by September 10.

 

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Investing in digital gold? You may not like this new regulation

Currently, there are three digital gold companies in India: MMTC-PAMP India, Augmont Gold and Digital Gold India with its SafeGold brand. Digital gold is sold through online platforms like brokerage and e-wallets by these firms.

While online brokerage firms like Groww, Motilal Oswal, HDFC AMC will be affected by these regulations, non-broking platforms or mobile wallets like phone Pe, Google Pay can continue selling digital gold.

However, if you already own digital gold, no need to panic. You can easily exit your investment through your broker before the deadline.

While the new regulation is not positive for the digital gold industry, one must remember the various advantages of investing in digital gold like safety, purity, no minimum purchase, etc. And even though you cannot invest in them through online brokers, you can continue your investment through mobile wallets.

First Published: 14 Dec 2021, 03:20 PM IST
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