InvestorQ : Why has the NSE barred its registered brokers from selling digital gold on their platform?
diksha shah made post

Why has the NSE barred its registered brokers from selling digital gold on their platform?

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ishika Banerjee answered.
4 months ago
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In fact, NSE has instructed the brokers to desist from selling digital gold on their platforms under instructions from SEBI. There are a number of reasons why SEBI has had objections to the selling digital gold products by brokers.

1) In SEBI’s opinion, digital gold is not a security as defined in the Securities Contract Regulation Act or SCRA. Securities include equities, futures, options, indices, ETFs and commodity futures and options. Since digital gold is not a security, brokers are not allowed to offer it on their platforms. This is more of the legal side of it.

2) The second objection SEBI had pertains to the creation and execution of digital gold at the back-end. Unlike equities and F&O contracts, SEBI has little jurisdiction or control over the creation and extinguishing of digital gold, which is done by third parties. Most of the big digital gold sellers like Paytm, Phone Pe and Google Pay are not SEBI regulated.

3) Thirdly, SEBI is worried about the lack of audit and inspection trail in digital gold. For example, the originator of digital gold assures that the physical gold equivalent is ring-fenced and kept in a vault. But there is not way to either audit or verify this. Also, SEBI is not sure of the issuers have enough gold if there is a surge in demand for gold conversion.

In the light of these challenges, SEBI has asked members of NSE and BSE not to sell these digital gold products on their broking platform.

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