80 million Indians, ₹25,000 crore in digital gold, average ticket size ₹100 and until now, not one statute governing any of it.
NEW DELHI: The Ministry of Finance has initiated inter-ministerial discussions to bring India’s digital gold market under formal statutory regulation for the first time, according to financial media reporting in mid-to-late September 2026. The proposal under consideration would place digital gold platforms under joint oversight of the Reserve Bank of India and the Securities and Exchange Board of India, alongside a mandatory requirement that every digital gold unit sold to retail investors be backed one-to-one by physical bullion.
The legal route under discussion involves classifying digital gold as a “security” under the Securities Contracts (Regulation) Act, 1956, following inputs from market regulators, commercial banks, payment aggregators and bullion refiners. It is worth noting that this remains strictly a consultation-stage proposal. Neither the RBI nor SEBI has issued a formal notification, draft circular or public consultation paper, and the timeline for any statutory rules remains unclear.
A Product Built on Micro-Transactions and Legal Silence
Digital gold allows retail investors to buy fractional gold, starting from as little as ₹10, through mobile apps, converting the money into grams of 24-karat bullion held in institutional vaults. The market has grown to an estimated $3 billion, or roughly ₹25,000 crore, in assets under management across more than 80 million retail accounts. The average transaction size sits at approximately ₹100, and over 90% of purchases flow through UPI.
The industry operates on two levels. Primary issuers such as MMTC-PAMP India, SafeGold and Augmont Goldtech hold and vault the underlying metal, while distribution happens through UPI apps like PhonePe, Google Pay and Paytm, fintech platforms including CRED and Jar and retail jewellers such as Tanishq and Malabar Gold. Yet despite this scale, digital gold has never fit neatly into any existing regulatory category. It is not a security, not a commodity derivative, not a payment instrument and not a deposit under any current Indian statute, leaving it governed only by general contract law and GST regulations, entirely outside SEBI and RBI’s supervisory reach.
How Regulators Got Here
That gap did not go unnoticed. SEBI barred stockbrokers from offering digital gold in August 2021, citing rules against non-securities business activities, and extended similar restrictions to registered investment advisers two months later. By November 2025, SEBI issued a formal public caution advisory warning retail investors that digital gold sits entirely outside its protective framework, meaning mechanisms like the SEBI Complaints Redress System and Investor Protection Funds simply do not apply to these holdings.
Industry players attempted to pre-empt statutory intervention by forming their own self-regulatory body. On May 11, 2026, major issuers and fintech distributors launched the Digital Precious Metals Assurance Council of India, chaired by policy expert Nirupama Soundararajan, establishing voluntary standards including 1:1 physical backing and independent audits. However, voluntary compliance appears to have fallen short of addressing regulators’ underlying concerns: the risk that platforms could fail and leave customer gold claims unprotected from creditors, the possibility that unaudited operators issue unbacked digital balances, and persistent worries about anti-money laundering gaps given the sheer transaction velocity across UPI rails.
What the New Framework Would Actually Require
Under the proposed structure, platforms would be legally barred from holding fractional or unbacked digital gold balances. Every unit would need physical bullion, held in secure vaults meeting LBMA or Indian Good Delivery purity standards, verified through independent assaying, and legally segregated from the platform’s own balance sheet through an independent security trustee arrangement, insulating customer holdings from any future insolvency. Regular independent audits would reconcile vault inventory against digital ledgers.
The proposed division of labour splits responsibility along familiar lines. SEBI would take charge of issuer licensing, capital adequacy, vault manager accreditation and dispute resolution once digital gold is classified as a security. The RBI, meanwhile, would oversee payment aggregators and UPI rails carrying the money, enforce KYC and anti-money laundering compliance, and monitor the broader macro-financial implications, including how digital gold savings might affect traditional bank deposits.
Who Wins and Who Gets Squeezed
The shift toward mandatory full-reserve backing carries real commercial consequences. Issuers would need to immediately deploy capital to purchase physical gold against every transaction, tying up working capital, on top of new costs for vaulting, insurance, assaying and trustee fees. That combination is likely to accelerate consolidation in the sector, pushing smaller or undercapitalised platforms to abandon their own ledgers and instead operate purely as distributors for larger, well-capitalised refiners. At the same time, greater transparency and standardised reporting could compress the buy-sell spreads currently charged to retail investors, even as digital gold continues to carry a cost disadvantage against Gold ETFs, which charge no purchase GST.
For retail investors, the upside is more straightforward: statutory regulation would replace informal trust in individual platforms with actual legal protections, including recourse under securities law that simply does not exist today.
What to Watch
Several questions remain unresolved as talks continue, chief among them how existing AUM will transition to verified 1:1 reserves, and what grandfathering period platforms might be granted. Analysts, meanwhile, will be watching for the first concrete signal of progress: a formal joint discussion paper or draft SCRA notification from the Ministry of Finance or SEBI, alongside any updated RBI guidance on payment aggregators handling gold-linked transactions. Until then, the $3 billion market that millions of Indians access through their phones each day continues to operate exactly as it has for years, on trust rather than statute.
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