Refrain from dealing in digital gold

New Delhi: Capital markets regulator Sebi on Thursday asked investment advisers to refrain from dealing in digital gold, which is an unregulated product. This came after Sebi noted that some registered investment advisers are engaged in unregulated activity by providing a platform for buying, selling or dealing in unregulated products including digital gold.

"Undertaking such unregulated activity including dealing (i.e., advisory, distribution and execution/ implementation services) in digital gold by investment Advisers is not in accordance with the provisions of the Sebi Act, 1992, read with the Sebi (Investment Advisers) Regulations, 2013," the regulator said in a statement.

Accordingly, Sebi has asked investment advisers to refrain from undertaking such unregulated activities. It further said any dealing in unregulated activities by investment advisers may entail action under the Sebi Act and regulations framed thereunder. In August, the National Stock Exchange (NSE) had directed its members, including stockbrokers, to discontinue the sale of digital gold on their platforms by September 10.

Vijay Singhania, chairman, TradeSmart, said: "Digital gold units are not issued by any regulated entity. There is no method to check whether the digital gold certificate is backed with physical gold or not."

The direction came after the capital markets regulator noted that certain members are providing a platform to their clients for buying and selling digital gold. The Securities and Exchange Board of India (Sebi), through a letter dated August 3, informed the exchange that the said activity is in contravention of Securities Contracts (Regulation) Rules (SCRR), 1957, and the members should refrain from such dealings. The SCRR norms restrict members from engaging, either as principal or employee, in any business other than that of securities or commodity derivatives, except as a broker or agent, not involving any personal financial liability.