Youth-Driven Demand Fuels Digital Gold Surge: Implications of Sebi’s Warning
Investors in India, particularly younger buyers, have shown a strong interest in digital gold, purchasing an estimated 12 tonnes from January to November this year, according to the World Gold Council (WGC). This surge in digital gold transactions comes despite a recent slowdown in demand following a regulatory advisory from the Securities and Exchange Board of India (Sebi). The rise in digital gold purchases highlights a growing trend among first-time investors who prefer the convenience of online transactions.
Digital Gold Popularity Among Younger Investors
Digital gold has become increasingly popular, especially among millennials and Gen Z, who account for nearly two-thirds of buyers. This investment option allows consumers to buy, sell, and hold gold online without the need for physical delivery, with purchases starting as low as Rs 1. The ease of access through apps and fintech platforms has made digital gold an attractive choice for first-time investors. In 2024, industry estimates suggested that Indians purchased around 8 tonnes of digital gold, indicating a significant increase in interest this year.
However, the momentum for digital gold transactions has faced challenges. Following Sebi’s advisory in November, which warned that digital gold is not a regulated security and does not fall under existing commodity market regulations, many investors have become cautious. The advisory urged potential buyers to carefully assess the risks associated with digital gold platforms, leading to a temporary slowdown in transactions.
Regulatory Developments and Industry Response
In response to the regulatory gap, the India Bullion & Jewellers Association (IBJA) is establishing a self-regulatory organization (SRO) for digital gold providers. This initiative aims to ensure that customers’ digital gold holdings are fully backed by physical gold and subject to regular audits. The SRO is expected to begin onboarding members in January, with the goal of finalizing rules and regulations by the end of March or early April next year.
Surendra Mehta, the IBJA national secretary, emphasized the importance of developing technology to regulate digital gold players. He stated that periodic audits of all digital gold providers would help build confidence among buyers and deepen the market. This move reflects a growing demand for a regulatory framework that can enhance the credibility of digital gold transactions.
Market Challenges and Future Outlook
Despite the promising growth in digital gold purchases, the Sebi advisory has created uncertainty in the market. A senior executive from a digital gold platform noted that the advisory led to confusion, causing many stakeholders, including buyers, to halt their digital gold transactions. Efforts are being made to reassure customers and encourage them to return to digital platforms.
Industry participants believe that digital gold will continue to play a vital role in the investment landscape. Sachin Jain, WGC’s regional chief executive for India, highlighted that gold remains a significant asset class in Indian households. He noted that digital gold enhances access through fractional ownership and transparent pricing, addressing concerns related to storage and purity. As digitalization progresses, it is expected to reinforce gold’s status as a trusted asset for Indian consumers.
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