Enable oldest asset on a digital platform

Digital gold platforms have made it simpler and more secure than ever for people to buy and sell gold. They allow individuals to accumulate gold in small fractional quantities through UPI without the burdens of storage, security, or purity verification. This has allowed the product to reach small investors who previously were excluded from formal investment avenues.

Regulatory uncertainty grows

Regulatory signals from the RBI now risk creating friction in this ecosystem. Actions invoking the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, against digital gold platforms equate operational structures with deposit-taking behaviour and produce regulatory ambiguity around legitimate commerce.

The customer buys gold. The platform charges them the going price for the day. The metal goes into an insured, independently audited vault under a third-party custodian. The customer can sell it back at the market rate when they want or ask for it to be delivered as coins or a small bar.

Every purchase move through UPI and transactions above Rs 50,000 a year is tied to the buyer’s PAN. Each transaction also carries a GST. The full chain, from the buyer to the bar in the vault, is auditable. The same purchase made in cash at a local jewellery store leaves nothing of that record.

Questioning the legitimacy of these platforms — that have been present for over 12 years, with all players operating on identical mechanisms — is a stretch. They sell goods. Ponzi schemes promise returns. When the regulator signals otherwise, households drift back to the local jeweller, where the transaction is invisible to tax authorities, KYC does not apply, and any losses get absorbed by the customer. The tangle exists because India does not yet have a clear law on what digital gold actually is.

State enforcement has, in places, run well ahead of state understanding. Take the Jar Gold matter. The Bengaluru Sessions Court, in an April 4 order, took the prima facie view that the company’s operations were sales of physical gold and did not amount to deposit-taking under the BUDS Act. The court also noted that more than 1,500 kg of physical gold had been verified with Brink’s India — a highly regarded and audited vault provider — and that there were no customer complaints on record. Police have since challenged the order in high court. Until that is sorted out, digital platforms continue to operate under enforcement risk.

The RBI looks after inflation and monetary stability. The household balance sheet has never been its remit. For most Indian families, that job has fallen on gold.

The RBI, mind you, holds the same view about gold. Its own stash has climbed to 880.2 tonnes. Gold now accounts for 15.6% of India’s foreign exchange reserves, up from 10% a year earlier. The reasons it cites for that build-up — like inflation and currency exposure — are the same reasons households cite for keeping 34,600 tonnes of gold at home.

For retail investors who want a regulated route into gold, the options have thinned. The sovereign gold bond used to be the standard pick. The last tranche was issued in February 2024, and the government has said it’s not coming back anytime soon. With gold prices where they are, the scheme just costs the treasury too much to be worth running.

Why users choose digital gold

Gold exchange-traded funds (ETFs), the Sebi-regulated alternative, pulled in roughly Rs 313 billion in inflows over the first 11 months of 2025, taking cumulative holdings to 86.4 tonnes by November. Compared to 34,600 tonnes sitting in lockers, almirahs, and bank vaults across the country, that figure is trivial. And then the real point of digital gold platforms emerges: Buying an ETF requires a demat account too, which puts it out of reach for the customer setting aside Rs 10 or Rs 50 at a time. The vast majority of Indians don’t have a demat account.

That smaller customer is the one digital gold platforms have actually found. Often without realising it, they are putting away small amounts each day through UPI, on apps they already use for groceries and rent. They are not the threat to formal finance that current regulatory anxiety seems to imagine. ETFs, in their current form, cannot serve this customer.

Each of these has been solved before. Payment aggregators sit under an RBI framework that requires them to maintain Rs 25 crore in net worth, scaling up over three years. Mutual fund schemes are reconciled daily against their custodians, and audit reports get filed monthly. Bank deposits carry Rs 5 lakh of Deposit Insurance and Credit Guarantee Corporation’s cover per depositor. Sebi’s SCORES platform handles investor grievances across the products it regulates. The piping already exists and one could be routed to digital gold.

Another parallel is the growth of UPI. In 2017, payments through UPI looked very similar to what digital gold looks like now. A real product that was growing fast, sitting in a category nobody had yet defined. The National Payments Corporation of India iterated rules over the following years. UPI now handles more than 15 billion transactions a month, by far becoming the ubiquitous way Indians pay. The regulator allowed UPI to grow while assembling rules around it.

Digital gold is no longer a niche product. Restricting it through enforcement does not make demand for gold disappear. The household money that would have moved into a digital wallet still has to go somewhere, and it tends to end up at a jewellery shop where nothing is recorded. The regulatory perimeter has to expand to include digital gold.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.