Digital gold sales a breach of Securities Contracts (Regulation) Rules: SEBI

Gold, as National Stock Exchange (NSE) in its circular has ordered all members that includes stockbrokers and wealth managers to stall sale of digital gold on their platforms by September 10. The announcement came shortly after market regulator SEBI had called digital gold sales a breach of Securities Contracts (Regulation) Rules (SCCR), 1957.

Newly turned unicorns such as Groww, Mumbai-based Upstoxx, Paytm Money along with traditional brokers such as Motilal Oswal and HDFC Securities which regulated by SEBI have been asked to stop their operations related to digital gold by September 10, as per an ET report. Kishore Narne of Motilal Oswal told the daily that the company honors SEBI’s order of refraining digital gold products to SEBI-regulated entities. He further added that customers already holding virtual gold will not be affected with the move. Alleged use of clients’ money to purchase digital gold might be the possible reason behind SEBI’s concern over virtual gold sale.

Digital gold is a virtual way of investing in the gold metal without worrying about the storage cost and the quality of the gold. Digital gold further allows a person to invest as minimum as INR 100 and hold a fraction of virtual gold, something that is not possible in physical gold which is sold in gram or karat.

In India primarily Augmont Gold Ltd, MMTC-PAMP India, and Digital Gold India offers virtual gold to its customers. They are stored safely in high-security vaults free of cost with insurance. Fintech startups in the country ideally collaborate with these companies to enable users to invest in virtual gold. Digital Gold is also known to provide easy liquidity thus helping the distressed to get cash in a short period of time. The said restriction is likely to dampen the digital gold market that was expected to expand during the upcoming festive season when Indians prefer purchasing gold, a sign of prosperity and good luck.

Courtesy- Inc 42