Investors in India, particularly younger buyers, have demonstrated 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 increase in digital gold transactions occurs despite a recent slowdown in demand following a regulatory advisory from the Securities and Exchange Board of India (Sebi). The rising trend in digital gold purchases underscores the growing preference for online transactions among first-time investors.
Digital Gold Gaining Popularity Among Younger Investors
Digital gold is increasingly favored, especially among millennials and Gen Z, who account for nearly two-thirds of buyers. This investment option enables consumers to buy, sell, and hold gold online without needing physical delivery, with purchases starting as low as Rs 1. The access provided through apps and fintech platforms has made digital gold an appealing choice for new investors. Industry estimates suggested that Indians purchased around 8 tonnes of digital gold in 2024, indicating significant interest this year.
However, the momentum for digital gold transactions has faced hurdles. Following Sebi’s advisory in November, which cautioned that digital gold is not a regulated security and does not comply with existing commodity market regulations, many investors have grown cautious. The advisory urged potential buyers to carefully evaluate the risks tied to digital gold platforms, resulting in 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 subjected to regular audits. The onboarding of members is expected to begin 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 need for developing technology to regulate digital gold players. He noted that periodic audits of all digital gold providers would help enhance buyer confidence and deepen the market. This initiative reflects an increasing demand for a regulatory framework to enhance the credibility of digital gold transactions.
Market Challenges and Future Outlook
Despite the promising growth in digital gold purchases, the Sebi advisory has introduced uncertainty in the market. A senior executive from a digital gold platform remarked that the advisory led to confusion, causing many stakeholders, including buyers, to pause their digital gold transactions. Efforts are underway to reassure customers and encourage them to return to digital platforms.
Industry participants are optimistic that digital gold will continue to play a crucial 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 pointed out that digital gold improves access through fractional ownership and transparent pricing, addressing concerns related to storage and purity. As digitalization continues to evolve, it is expected to reinforce gold’s status as a trusted asset for Indian consumers.
Digihunt is not a financial advisor and this is not investment advice.