National Stock Exchange (NSE) has directed its members, including stockbrokers, to discontinue the sale of digital gold on their platforms by September 10.
The announcement came shortly after market regulator SEBI had called digital gold sales a breach of Securities Contracts (Regulation) Rules (SCCR), 1957.
Newly turned unicorns such as Groww, Mumbai-based Upstoxx, Paytm Money along with traditional brokers such as Motilal Oswal and HDFC Securities which regulated by SEBI have been asked to stop their operations related to digital gold by September 10.
Kishore Narne of Motilal Oswal told the daily that the company honors SEBI’s order of refraining digital gold products to SEBI-regulated entities. He further added that customers already holding virtual gold will not be affected with the move.
Alleged use of clients’ money to purchase digital gold might be the possible reason behind SEBI’s concern over virtual gold sale.
In India primarily Augmont Gold Ltd, MMTC-PAMP India, and Digital Gold India offers virtual gold to its customers. They are stored safely in high-security vaults free of cost with insurance. Fintech startups in the country ideally collaborate with these companies to enable users to invest in virtual gold.
Digital Gold is also known to provide easy liquidity thus helping the distressed to get cash in a short period of time. The said restriction is likely to dampen the digital gold market that was expected to expand during the upcoming festive season when Indians prefer purchasing gold, a sign of prosperity and good luck.
Deepak Abbot of Indiagold, a startup that offers gold loans, has hinted that the move by SEBI could possibly be an indication of regulation on the digital gold market. While people purchasing physical gold from jewellery shops still dominate the market, over the last few years, the virtual gold market has seen a growth in demand. As per World Gold Council, India traded 4 to 5 tonnes of digital gold in 2019 with 25 lakh investors.
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