Digital Gold Market Faces Joint RBI and SEBI Oversight as Centre Weighs Mandatory Physical Backing — September 20, 2026

India’s digital gold ecosystem—a market that has rapidly expanded to an estimated $3 billion in assets under management—is on the verge of entering a formal regulatory regime. The Union Finance Ministry has initiated consultations with financial regulators, commercial banks, and industry participants to institute joint oversight under the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

A central pillar of the proposed framework is the requirement that every fractional unit of digital gold sold to retail buyers must be backed 1:1 by physical bullion held in secure vaults, supported by mandatory independent audits and statutory reporting.

Closing the Regulatory Vacuum

Digital gold has become one of the most accessible retail investment products in the country, with average transaction sizes hovering around ₹100. Leading fintech applications and bullion entities have tapped into this demand, allowing micro-savers to accumulate fractions of a gram without holding physical jewellery or coins.

However, the rapid growth unfolded within a regulatory grey zone. In 2025, SEBI cautioned retail investors, clarifying that digital and e-gold products sold on various commercial platforms were neither notified as securities nor classified as exchange-traded commodity derivatives. Consequently, transactions fell entirely outside the capital market watchdog’s purview, leaving investors vulnerable to counterparty, operational, and custody risks.

According to industry consultations, a broad consensus has emerged among stakeholders that digital gold should formally be recognised as a security under the Securities Contracts (Regulation) Act, 1956 (SCRA). Such a reclassification would provide a clear statutory anchor, establishing SEBI as the primary supervisor of market conduct and product issuance, while the RBI would oversee systemic, payment, and banking linkages.

Key Pillars of the Proposed Framework

Regulators and market participants have recommended several structural guardrails to eliminate regulatory arbitrage:

• Mandatory 1:1 Physical Backing: Platforms will be required to ensure that every unit of digital gold in circulation corresponds directly to vaulted, vaulted-grade physical gold.
• Independent Trustee and Vault Audits: Digital holdings must be segregated legally from platform balance sheets through independent custodians and trustees, supported by periodic third-party audits to prevent double-pledging or under-collateralisation.
• Barring Fly-by-Night Operators: Formal licensing mandates will curb unverified intermediaries and mitigate the risk of financial fraud or money-laundering activities.
• Standardised Grievance Redressal: Investors will gain access to formal dispute mechanisms similar to those in equity and mutual fund frameworks.

What This Means for Indian Investors

For retail investors, the introduction of RBI-SEBI supervision addresses the largest vulnerability of digital gold: credit risk. While products such as Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bonds (SGBs) have long operated under SEBI and RBI regulations respectively, digital gold previously offered no sovereign or regulatory safety net if an issuing platform or vault partner faced liquidation.

Legal segregation ensures that in the event of platform distress, investor gold cannot be liquidated to satisfy general company liabilities.

The regulatory transition may also reshape retail pricing. Currently, digital gold purchases incur a 3% Goods and Services Tax (GST) alongside buy-sell spreads typically ranging between 2.5% and 5%. Stricter compliance, reporting standards, and mandatory audits could compress spreads over time as institutional competition deepens and disclosure rules enhance market pricing transparency.

Tags: RBI SEBI Digital Gold Ministry of Finance Bullion Market SCRA