Government Plans Digital Gold Rules To Boost Transparency, Investor Protection

New Delhi, Aug 7 (KNN) The government is preparing to introduce a formal regulatory framework for digital gold by next year, aiming to enhance transparency, strengthen consumer protection and standardise operations in the rapidly growing investment segment.

Government, Regulators Hold Consultations On Digital Gold Framework

The proposed framework follows consultations involving the Ministry of Finance, the Reserve Bank of India (RBI), the Ministry of Consumer Affairs and the Digital Precious Metals Assurance Council of India (DPMACI), a self-regulatory body established earlier this year by leading digital gold providers and fintech platforms.

Digital gold has so far operated in a regulatory grey area, with the Securities and Exchange Board of India (SEBI) maintaining that such products do not fall under its regulatory ambit, while the RBI regulates only the payment systems used for purchases and not the underlying investment product.

Proposed Norms To Mandate Physical Gold Backing And Greater Transparency

Under the proposed framework, digital gold providers will be required to ensure that every unit of digital gold sold is fully backed by an equivalent quantity of physical gold stored in insured vaults and verified through regular independent audits, reported Economic Times.

The framework is also expected to introduce uniform disclosure requirements to provide investors with greater transparency regarding the storage, verification and redemption of their holdings.

Framework Aims To Strengthen Consumer Protection

The move comes amid the rapid growth of digital gold investments, particularly among younger investors, who are increasingly purchasing fractional quantities of gold through UPI-enabled platforms.

Officials believe the regulatory framework will help address rising consumer complaints while bringing digital gold closer to the governance standards applicable to products such as Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bonds.

Industry Welcomes Move Towards Formal Regulation

Industry participants have welcomed the proposed regulations, saying a formal framework would improve investor confidence, create a level playing field for market participants and support the sector's long-term growth while maintaining room for innovation.

The government is yet to finalise the framework, including the regulator that will oversee the sector, with further details expected after ongoing consultations are completed.

(KNN Bureau)