On August 10, the National Stock Exchange (NSE) issued an order to its members, including stockbrokers, to stop selling digital gold on their platforms by September 10. The directive came after SEBI discovered that some members were offering their clients a platform for buying and selling digital gold.
SEBI has not come up with any new ban, as Section 8(3) of SCRR, 1957 is there for many years, and SEBI has just reiterated the existing rules. They are clearly provided ways and means how third-party products could be sold to end customers. They are saying, if you don’t follow the guidelines, you have to wind down.
Section 8 (3) (f) of Securities Contract (Regulation) Rules, 1957 says “No person who is a member at the time of application for recognition or subsequently admitted as a member shall continue as such if he engages either as principal or employee in any business other than that of securities 7 [or commodity derivatives] except as a broker or agent not involving any personal financial liability”
Any SEBI registered broker can offer third-party products however they have to follow certain SEBI guidelines. There are stockbrokers, who want to provide their clients with other third-party products, and Digi gold is one of them, need to follow the SEBI guidelines. SEBI ban date of 10 Sep was given to those who are not following the guidelines.
Some of the partners are contemplating, but all of our partners are already in compliance as per SEBI guidelines, there is no need to panic, as there is no ban per se. Ban is only if they are not following the guidelines. SEBI has given guidelines for all unregulated products, be it trading in International Stocks, trading in art, real estate, etc.
Our customer base is a mix of one who directly buys Digi gold from our platform, second the customers of partnered broking and fintech players. All of our customers should stay assured that their gold is secured in our vaults and they can get delivery whenever they want. Our partners have always followed the SEBI guidelines and will continue to do so in the future.
SEBI is right at their end because they have just given dos and don’ts on products that are not regulated by it. There is a hype about Digi gold only because it is a growing product. New-age investors are fascinated with digital gold. There are talks that SEBI will fill the regulatory vacuum in this asset classes that’s becoming increasingly popular with Millennials, and if so happens will be positive and welcomed by Digi Gold players. SEBI’s involvement as a regulator would enhance investor confidence in this asset class. Overall participation will increase as customers will be allowed to buy gold as a digital asset.