Is digital gold a safe investment? SEBI warns investors of risks and lack of regulation.

More Indians are investing with just a few taps on their screens, and gold is no exception. In recent years, digital gold has become a go-to option for tech-savvy investors looking for a simple way to gain exposure to the yellow metal without stepping into a jewellery store. It's marketed as pure, accessible, and backed by physical reserves—you can buy it on apps like PhonePe or Paytm within seconds.

But with convenience comes confusion. Many investors are starting to ask—is digital gold a safe investment? Unlike traditional gold or SEBI-regulated options like ETFs and Sovereign Gold Bonds, digital gold falls into a grey zone. That uncertainty has grown stronger after SEBI publicly warned about the regulatory gaps in this space. If a platform goes bust or a provider mismanages gold reserves, what happens to your holdings?

This blog breaks down everything you need to know before hitting “buy.” We'll explain how digital gold works, who's behind it, and why companies like MMTC PAMP and Augmont matter when it comes to safety. We'll also look at how digital gold compares with other gold investment options, the risks highlighted by SEBI, and when it might make sense in your portfolio.

If you're unsure whether buying gold digitally is more risky than rewarding, or you’re wondering if providers like MMTC PAMP are safe, we'll help you cut through the noise. By the end, you’ll have a clearer picture of the benefits and downsides—so you can decide if digital gold fits your goals or if it’s better to look elsewhere.

Understanding digital gold and how it works

What is digital gold?

Digital gold is a way to buy small quantities of physical gold online without needing to hold or store it yourself. When you buy digital gold, you're actually purchasing a certain quantity of 24-karat gold that is stored in a secure vault by a third-party provider.

Its appeal comes from how easy it is to access—you can start investing with as little as ₹1. You don’t need to visit a jeweller or open a demat account. It’s ideal for those who want exposure to gold prices without the hassle of physical delivery or storage.

But is buying digital gold safe? That depends on the provider and the platform used. Your gold is supposedly backed physically, but you never see it unless you later redeem it in coin or jewellery form. So, you're trusting someone else to keep it safe on your behalf.

How do you buy and store digital gold?

You can buy digital gold using apps like PhonePe, Paytm, Google Pay, and Zerodha. These platforms partner with licensed vault managers who handle the storage and safekeeping. Once you make a purchase, the gold is automatically allocated and stored under your name.

Your holding is recorded digitally, and depending on the platform, you can track its value in real-time. Some platforms also offer the option to convert your holdings into coins or bars for physical delivery, often after hitting a minimum threshold.

Storage costs are typically covered for a limited time—usually five years. After that, a small charge may apply. However, remember that you’re not interacting with the vault directly; you're trusting the platform and its partners to manage everything as promised.

Who are the leading players in the digital gold market?

The top digital gold providers in India include:

• MMTC PAMP: A joint venture between Switzerland’s MKS PAMP and India’s MMTC Limited (a government enterprise)
• Augmont: A private firm that manages gold trading and vaulting with ISO certifications
• SafeGold: Operated by Digital Gold India, partnered with multiple fintech platforms

These providers are the actual custodians of the gold. Apps like PhonePe simply act as the storefront. So, the safety of your investment rests on how reliable these backend players are.

Now that you know how digital gold works, let’s look at why SEBI is raising red flags—especially around how safe digital gold is when there’s no formal regulation involved.

Why SEBI is warning investors about digital gold

Lack of regulatory oversight

One of SEBI’s key concerns is that digital gold operates outside the scope of India’s financial regulatory framework. Unlike mutual funds or stocks, digital gold isn’t classified as a security. So, it's not governed by SEBI or the Reserve Bank of India (RBI).

This gap means there’s no formal regulation to protect investors if something goes wrong. For example, if a provider like Augmont or MMTC PAMP fails to maintain proper records—or worse, misuses the gold—you have limited recourse.

How safe is digital gold when it falls through a regulatory crack? That’s the core issue. Without clear legal guidelines or investor protections, your reliance is entirely on private companies and their internal processes.

Potential risks to investors

Digital gold might seem simple to use, but behind the scenes, the risks are real. Here are some key ones:

• Platform risk: Your gold is stored by a third party, but your access is through an app or wallet. If the app shuts down, getting your gold out may be a hassle.
• No insurance mandates: There’s no regulatory requirement for providers to insure your holdings against theft or fraud.
• Redemption risk: Converting digital gold to physical gold can involve delays, hidden fees, or minimum thresholds.

Also, the lack of standardization creates confusion. One provider might offer free storage for 5 years, another for only one year. This inconsistency can lead to surprise costs or terms investors didn’t expect.

Recent SEBI statements and implications

In late 2023, SEBI issued a formal warning discouraging brokers from offering digital gold through their platforms. The reason? Digital gold doesn’t meet the definition of a regulated financial product.

SEBI also flagged several cases where unregulated entities were selling gold without guarantees or proper documentation. For investors, this raises concerns about transparency and accountability.

The message was clear—until digital gold is brought under an official regulatory framework, SEBI can’t protect your interests. That doesn't mean digital gold is unsafe by definition, but it does mean you need to be extra cautious about how safe digital gold is based on who you're buying from.

So, how does digital gold stack up against traditional gold or regulated alternatives like ETFs and bonds? Let's compare.

Comparing digital gold with traditional gold investments

Liquidity and accessibility

If you’re wondering whether digital gold is safe or not, one aspect to consider is its ease of use. Digital gold lets you buy as little as ₹1 worth of 24K gold instantly through apps like PhonePe, Google Pay, and Paytm. You don’t need to visit a jeweller or deal with delivery logistics.

Physical gold, on the other hand, involves transportation, storage, and sometimes making charges. With Sovereign Gold Bonds (SGBs), you lock in your investment for 8 years, although early exits are allowed after the fifth year. Gold ETFs are easier to sell on stock exchanges but may need a demat account.

So, if you're looking for convenience and quick access, digital gold wins on liquidity. But high liquidity doesn't always mean low risk—especially when regulation is weak.

Cost and storage

Digital gold eliminates the need for lockers or vaults. Gold is stored securely by providers like MMTC PAMP and Augmont on your behalf. Some even offer free storage for a limited period. After that, storage fees may apply.

With physical gold, you have to pay for safe storage or risk theft at home. SGBs and gold ETFs don’t deal with storage at all—they’re just financial representations of gold ownership, ideal for buyers who don’t need physical delivery.

Digital gold also avoids making and wastage charges tied to jewellery. But keep an eye on buying and selling spreads, which vary by platform.

Risk and regulation

This is the biggest difference. SGBs are issued by the RBI and offer 2.5% annual interest. Gold ETFs are regulated by SEBI and traded transparently through exchanges. Both offer clear safeguards.

Digital gold, however, misses this safety net. Your investment depends on private third-party providers. If you ever wondered, “is buying digital gold safe?”, the answer depends on provider credibility and platform trust—not government regulation.

So, digital gold may be useful, but it lacks the structured protections of regulated gold investments. Next, let's look at when it actually makes sense to consider digital gold in your portfolio.

When should you consider investing in digital gold?

Short-term convenience

Despite its regulatory gaps, digital gold can be useful in specific situations. If you're saving small amounts regularly, planning to gift gold, or want short-term exposure to gold prices without physical hassle, digital gold may work for you.

For example, apps like PhonePe let you gift digital gold instantly. That’s faster than buying physical coins or jewellery. Also, buying ₹500 worth of gold every month can be easier digitally, especially for goal-based saving.

However, this makes more sense if you’re not planning to hold it long-term. You may choose to redeem it for coins or transfer it to regulated products later. Think of digital gold as a temporary option—not your entire gold allocation.

Due diligence before investing

If you're still asking “is digital gold safe?”, the answer depends on who you're buying from and how you manage the risks. Stick to providers like MMTC PAMP or Augmont, which have reputations for quality and secure vaulting.

Ask questions before you invest:

• Who is the custodian of your gold?
• Are redemption options clear and reliable?
• Does the platform disclose spreads and fees upfront?

For instance, users often ask “is MMTC PAMP safe?” because it’s a joint venture with a government enterprise. That makes it more trustworthy than lesser-known startups. The same goes for Augmont, which is ISO-certified and serves major platforms.

If you're using apps like PhonePe, confirm they're partnered with regulated gold providers. Don’t treat digital gold like a bank deposit—it’s not backed by SEBI or RBI. So, stick with small amounts and stay informed.

Next, let’s tackle some common questions about safety and providers.