Bullion body IBJA sets up self-regulatory body to bring transparency to digital gold

The India Bullion and Jewellers Association (IBJA) on Tuesday announced the establishment of a self regulatory division for the digital gold industry in the wake of Sebi warning investors that digital gold products are neither regulated as securities nor as commodity derivatives and such products fall outside its jurisdiction and do not benefit from investor-protection mechanisms available for Sebi-regulated gold instruments such as gold ETFs, electronic gold receipts, or exchange-traded derivatives.

On November 11, IBJA had written to Sebi, urging the markets regulator to bring digital gold providers under its ambit or any other formal regulator, saying the move could dispel fears that consumers are being duped.

Now the association itself has decided to set up a self-regulatory division to enhance market integrity and consumer confidence in India’s rapidly expanding
digital gold industry. This is being done to foster consumer trust and ensure market integrity, while proactively demonstrating effective self-governance to potentially preempt the need for external government regulation.A release issued by the association said that the IBJA will formally establish a distinct Self-Regulatory Division (SRD) solely focused on the governance of digital gold. This division will be responsible for drafting the Self-Regulatory Framework (SRF), registering entities, and setting up the compliance monitoring and enforcement mechanism.

To ensure broad industry acceptance, IBJA’s initial action will be to convene a Digital Gold Industry Consultative Meeting (DGICM). Key invitees will include major digital gold providers, custodians, consumer advocacy groups, and regulators for informational exchange.

Following the DGICM, IBJA will formulate a comprehensive Consultation Paper (CP) detailing proposed rules in critical areas like clear rules on minimum purity, physical backing, insurance, and segregation of the underlying bullion. the stakeholders will establish rules on clear communication of risks, fees, and a defined grievance redressal mechanism. There will be independent and periodic audits of the digital gold players.

The Final Self-Regulatory Framework (F-SRF) is targeted for official publication by March 31, 2026. It is scheduled to become fully effective from April 1, 2026, onwards, allowing the industry a four-month transition period to align systems and processes. Adherence to the F-SRF will be mandatory for all participating entities registered with the IBJA Self Regulatory Division.

A cornerstone of the F-SRF is transparency, aiming to eliminate public doubts about the physical backing of digital gold. The framework will mandate a quarterly independent audit of the physical gold reserves of all member entities. Periodic audit will be conducted by industry experience auditing firms.

IBJA will establish a Digital Gold Transparency Portal to publicly display anonymized, aggregated compliance data and summaries of audit findings. The SRD will have the authority to impose penalties, fines, and suspension for non-compliance with the audit mandate or the F-SRF rules.