Zerodha CEO Nithin Kamath has urged investors to exercise caution when investing in digital gold, following a recent advisory by the Securities and Exchange Board of India (SEBI).
The market regulator had earlier this week warned that digital gold products are unregulated and pose significant risks to investors.
Responding to SEBI’s advisory, Kamath wrote on X (formerly Twitter) to highlight the risks associated with such investments. He advised investors to steer clear of digital gold and instead consider gold Exchange-Traded Funds (ETFs), describing them as among the safest and easiest ways to gain exposure to the yellow metal.
“Most people don’t realize that nobody regulates digital gold, and if something were to happen to the platforms or companies selling it, there’s not much you can do,” Kamath said in his post.
Kamath also pointed out that digital gold comes with high initial costs, including a 3% Goods and Services Tax (GST) and 2–3% in spreads, which could lead to an immediate loss of about 6% upon purchase. He emphasised that since Sovereign Gold Bonds (SGBs)are no longer available, gold ETFs remain the most reliable alternative for investors seeking gold exposure.
“Now that Sovereign Gold Bonds (SGBs) have stopped, gold ETFs remain one of the safest and easiest ways to get exposure to gold,” Kamath added.
SEBI’s advisory underlined that several online platforms have been promoting “Digital Gold” or “E-Gold” products, which are not covered under the securities market regulations. The regulator clarified that such products are neither classified as securities nor regulated as commodity derivatives, placing them outside SEBI’s regulatory purview.
The regulator stated that these unregulated products expose investors to counterparty and operational risks. It also warned that investor protection mechanisms available under SEBI-regulated instruments do not apply to digital gold.
SEBI noted that investors seeking exposure to gold should consider regulated investment options, including:
- Exchange-traded commodity derivative contracts
- Gold Exchange-Traded Funds (ETFs) offered by mutual funds
- Electronic Gold Receipts (EGRs) tradable on stock exchanges
These instruments, SEBI added, can be accessed only through SEBI-registered intermediaries and are governed by established regulatory frameworks.
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