By Administrator_India
National Stock Exchange has directed its members, including stockbrokers, to discontinue the sale of digital gold on their platforms by September 10.
The direction came after capital markets regulator Sebi said that certain members are providing a platform to their clients for buying and selling digital gold.
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 undertaking any such activities.
The SCRR rules restrict all 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.
Accordingly, NSE directed members not to carry out such activity and comply with the regulatory requirements at all times.
“Members, currently engaging in the activity, shall cease to undertake all activities in this regard, within one month from the date of this circular during which necessary communications, regarding the discontinuation, shall be made to the respective clients,” NSE said in a circular dated August 10.
TradeSmart Chairman Vijay Singhania 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.
Some jeweler firms like Titan and banks were known for selling digital gold.
Digital gold does not come under the definition of securities as defined in the Securities Contract (Regulations) Act 1956.
“The circular prohibits the dealing/offering digital gold-selling via Sebi registered entities, as it is not a security as mentioned above. It may be continued to be sold by the unregulated entities, subject to RBI directions if any,” Singhania said.
Kishore Narne, Head of Commodities & Currencies, Motilal Oswal Financial Services, said, “We were distributors of the digital gold product of MMTC-PAMP, with the backdrop of exchange issuing the directives for such product to be not sold by all stockbrokers of the stock exchange; we shall be discontinuing distribution of this product”.
According to him, MMTC-PAMP will continue to be the owner of the product and retain all the holdings of gold on behalf of clients and shall be offering all the redemption and sell-back options for all the existing clients.