The government is evaluating a new framework to regulate digital gold, potentially requiring full physical backing for every unit. This move aims to protect investors, who have parked nearly $3 billion in these currently unregulated assets. The proposed shift would bring the industry under joint supervision by the Reserve Bank of India and SEBI, marking a significant change from the current operational status.
The Indian government is preparing to bring the digital gold industry under a formal regulatory framework, potentially changing how millions of retail investors buy and hold gold through digital apps. The plan involves placing the sector under the joint supervision of the Reserve Bank of India and the Securities and Exchange Board of India. Under the proposed changes, every unit of digital gold sold could be required to be fully backed by physical gold, a measure aimed at ensuring transparency and protecting investor interests in a market estimated to hold about $3 billion in assets.
Currently, digital gold products on popular fintech platforms are not classified as regulated securities or commodity derivatives. This has been a point of concern for regulators. In 2025, the Securities and Exchange Board of India issued a warning, noting that these products operate outside its regulatory oversight. The regulator had advised investors to consider regulated alternatives like Gold Exchange Traded Funds or Electronic Gold Receipts, which offer standardized investor protection mechanisms.
If the new proposal is implemented, it would classify digital gold as a security under the Securities Contracts (Regulation) Act of 1956. This classification would mandate strict compliance, potentially requiring platforms to align their operations with official financial standards. The finance ministry has initiated discussions with regulators, banks, and major industry participants to finalize these guidelines.
For retail investors, the potential regulation could bring much-needed clarity. Currently, the reliability of digital gold holdings depends heavily on the internal processes of the platforms and their bullion partners. With formal oversight, investors could benefit from mandatory audits, standardized storage practices, and clearer custody norms for the physical gold backing their digital units. This shift may increase operational costs for platforms, as they would need to meet higher compliance standards.
The proposed framework is likely to impact various digital platforms, including PhonePe, BharatPe, MobiKwik, Gullak, Lenden Club, and CRED, which currently offer these services. These platforms will need to work closely with their bullion partners, such as MMTC-PAMP and SafeGold, to comply with the new rules. The industry has already shown some initiative through the formation of the Digital Precious Metals Assurance Council of India, a self-regulatory body created to standardize practices. Investors should monitor future government notifications for clarity on the implementation timeline and the specific compliance requirements that platforms will need to adopt.