India's top stock exchange has asked their members to stop the sale of digital gold on their platforms by September 10.
In a letter issued to members on August 10, NSE said regulations do not allow its members to engage in any business other than those related to trade of securities and commodity derivatives.
This implies that fintech players such as Upstox, Groww, Paytm Money as well as traditional brokers like HDFC Securities and Motilal Oswal will have to wind up the sale of digital gold on their platforms. Non-broking platforms such as Phonepe and Google Pay are not affected by this order as they are not a member of any exchange.
It's unclear as to what will happen to the digital gold investments of people who will fail to redeem it by the time of shutting down of operations. Some media reports said customers already holding virtual gold will not be affected by the move.
The NSE directive came shortly after SEBI raised concerns over such sales, calling it a breach of the Securities Contracts (Regulation) Rules (SCRR), 1957.
“...It has, however, come to the notice of SEBI/Exchange that certain members are providing a platform to their clients for buying and selling of digital gold. SEBI vide a letter dated August 3 has informed the Exchange that the said activity is in contravention of Rule 8 (3) (f) of SCRR, and members should refrain from undertaking any such activities,” the circular issued by NSE noted.
Digital gold is a virtual way of investing in the gold metal without worrying about the storage cost and the quality of the gold. Many online platforms have been offering the investment option for the past few years.
