SEBI Warning on Digital Gold: Understanding the Risks, Celebrity Influence, and the Case for Advertising Restrictions

On 8 November 2025, the Securities and Exchange Board of India (SEBI) issued a strong cautionary advisory warning the public about the risks associated with Digital Gold/ E-Gold products offered on various digital platforms. This warning arrives at a time when fintech ecosystems are aggressively promoting digital gold through festive campaigns, ₹1 gold sales, jackpot offers, and even celebrity- driven, game show inspired advertisements.

This widening gap between regulatory reality and advertising-driven perception demands a public conversation.

1. What SEBI Has Clarified:

SEBI emphasizes that digital gold products:

• Not a security under the Securities Contracts Regulation Act (SCRA);

• Not a commodity derivative under the SEBI Act;

• Not an Electronic Gold Receipts (EGR) or Exchange Traded Funds (ETF) under relevant SEBI frameworks;

• Not issued by a government or regulated financial intermediary;

• SEBI has no jurisdiction over digital-gold issuers or platforms.

This creates a regulatory vacuum.

2. Key Risks:

a. Counterparty Risk:

If the platform, gold vendor, or vaulting partner becomes insolvent, the investor may have no legal remedy under securities law. Similar is the situation in case of fraud, dispute, or mismanagement.

Investors cannot use:

• SEBI SCORES;

• Arbitration before exchanges;

• SEBI grievance redressal;

• Regulatory enforcement remedies.

b. Operational Risk:

Investors face uncertainties regarding:

• where gold is stored;

• whether it is audited;

• whether 1:1 backing actually exists;

• purity level;

• redemption conditions;

• storage/handling fees.

Investors may not legally “own” gold; they may merely hold a claim, which is again a critical risk. Yet ads rarely highlight these points. Instead, they lean on emotional appeal, celebrity charisma, and cultural affinity with gold. For first-time investors, especially in rural India, such signals are far more persuasive than a SEBI circular posted on its website, which is mostly beyond the reach of the vulnerable.

3. The Celebrity Influence: How Rural Audiences Are Particularly Vulnerable

While SEBI’s caution is a reminder that not everything that glitters digitally is gold, however, a critical but under-discussed dimension is the impact of celebrity endorsements, especially Amitabh Bachchan, whose presence in KBC-style adverts creates a powerful psychological effect on rural/ low literate audiences— a tendency advertisers know and use.

For rural and semi-urban households:

• Amitabh Bachchan embodies trust, familiarity, and credibility.

• A statement made by him is often interpreted as an assurance of safety.

• Many households believe that if “Bachchan-ji says it”, the product must be safe or government-approved.

This emotional influence, combined with low financial literacy, creates a fertile ground for misinformed investment decisions, particularly when the product is unregulated. 

This conflation is dangerous.

Regulators may argue that disclaimers exist, but disclaimers never compete effectively with the emotional reassurance created by national icons.

4. Recommended Regulatory Actions:

India already restricts ads for high-risk products — from crypto to tobacco to betting/ gaming; Digital gold deserves similar scrutiny. Regulatory advisories alone cannot counter aggressive celebrity-powered marketing. Advertising Standards Council of India (ASCI) Guidelines stipulate that celebrity endorsements must be truthful, non-misleading and backed by due diligence (rarely done). Courts have also in the recent rulings consider emotional persuasion through celebrity endorsements as misrepresentation, especially when the product lacks regulatory backing, and misleading promotions could violate the Consumer Protection Act, 2019. However, the following actions are required:

Short-Term:

• Public messaging must be- simple, visual, repetitive an delivered through the same channels advertisers use;

• Mandatory large-font risk disclosures, displayed as part of the ad, not hidden in footnotes;

• Terms such as ‘safe’, ‘secure’, ‘guaranteed’, ‘SGB-like’, or similar representations shall not be used;

• Restrictions on mass-broadcast ads targeting rural audiences;

• Prohibition of jackpot/ lottery/ game-show style promotions;

• Restrictions on celebrity endorsements;

Long-Term: 

• Bring digital gold under the ambit of ASCI Guidelines for Advertising of Virtual Digital Assets and Linked Services;

• Licensing requirements for platforms;

• Mandatory audit and vaulting standards;

• Investor protection mechanisms;

• Standardized redemption and pricing norms.