You’ve probably seen ads or apps promising that buying gold is now as easy as a click. Digital gold lets you buy small amounts, store it online, and sell it whenever you want. At first glance, it sounds simple, convenient, and modern. But here’s the thing, financial advisors often advise caution. Behind the ease and convenience, there are real risks that most people don’t notice. In this article, we’ll take a closer look at the dangers of digital gold and why, in many cases, it’s smarter to think twice before investing.
Digital gold is completely unregulated
One of the biggest concerns is that digital gold is not regulated in India. In November, 2025 SEBI publicly warned investors that “Digital Gold/E-Gold Products” are unregulated and may carry significant risk.
Unlike bank deposits, mutual funds, gold ETFs, or Sovereign Gold Bonds, digital gold platforms do not come under the supervision of the Reserve Bank of India, SEBI, or any other financial authority. This means that if a platform shuts down, is hacked, mismanages funds, or changes its rules, investors have no authority to turn to for help.
Adding to this risk, digital gold platforms set their own gold prices. Unlike an exchange where buyers and sellers determine prices, you are forced to accept whatever price the platform decides. This lack of transparency can often work against the investor.
Risks related to vaults and refiners
Your digital gold is usually not stored by the platform itself. It is held by a vault company or refiner. If this company faces bankruptcy, shuts down operations, or is found holding less gold than promised, investors could become unsecured creditors, which means recovery of funds could be very difficult or impossible.
Since digital gold is unregulated, there is no independent way to confirm whether the gold actually exists or whether the purity is as promised. If the platform collapses or has overstated its holdings, recovering your investment could become nearly impossible. A real-life example of this kind of risk is the 2022 FTX collapse, which revealed a $9 billion shortfall in customer funds, leaving many investors struggling to recover their money years later.
Immediate losses from buying and selling
Even if gold prices remain the same, investors can lose money immediately due to platform spreads and GST charges. Digital gold platforms usually maintain a 2–5% difference between buying and selling prices. This means that if you buy and then sell on the same day, the selling price is already lower than your purchase price.
Additionally, every purchase attracts a 3% GST, which is non-recoverable. For example, if you buy ₹10,000 worth of digital gold, you pay ₹300 in GST, reducing your effective investment to ₹9,700. If you sell the same day with a 4% spread, you receive about ₹9,600. This means a total loss of ₹700, or 7%, even if gold prices stay flat. These hidden costs quickly erode returns.
Storage and delivery charges
Many digital gold platforms advertise free storage for the first two to five years. However, after this period, they often charge 0.05% per month to 0.3–0.4% per year for storing your gold. On a ₹1 lakh investment, this could cost ₹300–₹400 annually.
If you request physical delivery, additional making charges, minting fees, and delivery costs may apply. These extra expenses further reduce the actual returns from your investment.
Withdrawals depend on the platform
Unlike gold ETFs, which settle within one working day through the stock exchange system, withdrawals from digital gold platforms depend entirely on the platform and the cooperation of the vault company. While most platforms promise a timeline, there is no regulator to escalate complaints to if delays occur, making this a potential risk for investors.
Digital gold cannot be held forever
Most digital gold platforms limit storage to 5–10 years. After that, investors must either sell their gold or request physical delivery. This limitation goes against gold’s traditional role as a multi-generational asset. Physical gold can be passed down indefinitely, and gold ETFs and Sovereign Gold Bonds can be held long-term, but digital gold has a forced expiration.
Safer, regulated alternatives
For those seeking gold exposure without the risks of digital gold, regulated alternatives exist.
→ Gold ETFs, regulated by SEBI, are backed by physical gold in audited vaults. They have low annual expenses of 0.30%–0.80%, no GST, and can be bought or sold easily on stock exchanges.
→ Sovereign Gold Bonds, issued by the Reserve Bank of India, offer a fixed 2.5% annual interest and tax-free gains if held till maturity. Though new government issues have stopped, these bonds can still be purchased through stock exchanges.
→ Electronic Gold Receipts are another SEBI-regulated option, traded on recognized exchanges and backed by verified physical gold.
What to do if you already hold digital gold
If you already own digital gold, it may be wise to sell it sooner rather than later. Holding it exposes you to uncompensated risks in an unregulated environment. After exiting, you can invest in Gold ETFs for liquidity and low costs, or split investments between Sovereign Gold Bonds and ETFs for a balance of tax efficiency, steady returns, and flexibility.
Losses incurred due to GST, spreads, or storage fees can be documented to offset capital gains elsewhere. If you are unsure about how to proceed, a Qualified Financial Advisor can help you plan your gold investments safely and align them with your long-term financial goals.
Conclusion
Convenience should never come at the cost of safety. For most investors, regulated gold options such as ETFs, Sovereign Gold Bonds, and Electronic Gold Receipts provide a safer, more transparent, and more reliable way to invest in gold.
