Sebi considers regulations for digital gold trade: Report

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India’s capital market regulator Securities and Exchange Board of India (Sebi) is planning to implement a regulatory framework for the trading of digital gold which is now being sold by various fintech firms as well as brokerages.

The National Stock Exchange barred its members and stockbrokers from the sale of digital gold on their platforms following a recent letter from Sebi. The NSE set a deadline of September 10 for the same. The move came after SEBI in its August 3 letter raised concerns over brokers providing a platform to their clients for buying and selling digital gold which violated the Securities Contracts (Regulation) Rules (SCRR), 1957.

Now Sebi is planning to fill the regulatory vacuum in this particular asset class that is gaining popularity amongst the new-age investors, according to a report in The Economic Times. The regulator also has plans to devise a framework that will allow registered brokers and market intermediaries to sell digital gold on a proposed spot exchange.

Sebi issued a paper for consultation, in May, on the projected exchange for trading in digital gold and the final regulatory guidelines are expected to be published soon. The rules proposed by Sebi will be applied immediately to all registered entities such as stock brokerages and investment advisors.

Central legislation might be needed to be put in place to empower Sebi to broaden its regulatory scope. “If Sebi has to regulate the whole digital gold sector and cover all the entities, the powers have to be designated to the regulator by an Act of Parliament,” the ET report added quoting a member of the secondary-market advisory committee at Sebi.

Sebi’s involvement could boost investor confidence

Those aware of the matter said that Sebi’s August 3 letter, asking stockbrokers to stop the sale and purchase of digital gold on their platforms, was aimed to align market intermediaries with the proposed spot exchange rules for online gold trades.

The digital gold has been a massive hit among the new-age investors in the Indian markets. All major fintech apps along with some of the biggest brokerages have also rolled out these products on their platforms in addition to equities. Some of the new-age fintech firms that allow customers to invest in digital gold on their platforms are Upstox, Groww and Paytm Money along with traditional brokers, like HDFC Securities and Motilal Oswal among others. For the purpose of dealing in digital gold, they have collaborated with gold firms such as Digital Gold India, MMTC-PAMP India and Augmont Gold. Sebi’s involvement as a regulator should boost investor confidence in this asset class according to media report.