In the future, we can see facets like decentralisation, sustainability, and the crypto-complementary power emerging strongly with Digital Gold. But where? And how does it stack up against alternatives like bonds, ETFs and against worries like inflation, hidden costs, regulation, scarcity, fractionalisation, liquidity, privacy, and speculation? Tarusha Mittal, COO & Co-Founder, OroPocket rubs away some dust and melts away some doubts about Digital Gold in this interview.
DQ: What makes digital Gold a better asset or investment option than other assets (especially traditional gold and commodities)?
Tarusha Mittal: Gold has been a reliable and consistent investment option for Indians for a long time. Apart from being revered as a status symbol, gold as an investment makes for a stable and secure asset. As the digital world has accelerated, there have been quite a few revolutions in the global markets including digital assets.
Gold as a digital asset provides numerous benefits in today’s day and age where people are accustomed to investing with a few clicks on their smartphones. Not only does digital gold provide the authenticity and reliability of physical gold, new products and services pop up nearly every day to ensure that investors have multiple trustworthy options too. With our Auto-Invest Plan, for instance, we allow users to invest in digital gold and silver in the form of a SIP that can go as low as ₹100 per day. Such innovative options allow these investments to be inclusive, reasonable as well as act as a protection against inflation and market volatility. We also have an option of pay via UPI, under which a person can easily liquidate their investment and digital gold as real money for day-to-day transactions, just scan and pay as simple as that.
Any asset, sector, or market, needs to be evaluated before investments and studied comprehensively to ensure the safety of investments.
DQ: How does it compare to sovereign bonds and ETFs?
Tarusha Mittal: When compared to sovereign bonds or gold exchange-traded funds, digital gold fares better in terms of flexibility, liquidity, and stability. Sovereign bonds are subject to lock-in periods and fines in case of premature redemptions whereas ETFs are like mutual funds, where the investor needs to pay certain recurring charges and is required to hold a Demat account. With digital gold, investors can forego the administrative processes and invest through various applications themselves. Furthermore, these assets are valued against existing physical gold stored in vaults which makes them a reliable long-term investing option.
But, as an investing principle, an investor should do their own research and pursue options that are acceptable to their risk appetite. Any asset, sector, or market needs to be evaluated before investments and studied comprehensively to ensure the safety of investments.
DQ: How does this option play out on inflationary worries, regulatory dynamics, and speculation-fears? Does it have a built-in scarcity as the usual gold or Bitcoin has?
Tarusha Mittal: Gold has historically acted as a protection against inflationary forces and continues to be so. During inflationary periods, gold prices tend to go up when interest rates go down. The same is also reflected in the economic strength of the country, thus, gold acts as a hedge against inflation risks. Gold, whether physical or digital, is still gold, the only difference is physical delivery of gold and we have bridged that barrier too by physically delivering your digital gold if anyone opts for that option, as our digital gold is backed by physical gold in 1:1 ratio which stored in vaults across India and abroad. This gives an intrinsic value to gold, built-in scarcity is still there. But this also gives gold its unique position as a hedge against inflation.
When it comes to regulatory dynamics, digital gold is not officially regulated under any government body, but the sector is on the Government’s radar as a means to provide a framework that protects all parties involved.
DQ: What are its strengths in areas like authenticity, fractionalisation, liquidity, privacy, value growth?
Tarusha Mittal: When a user invests in digital gold, an equivalent amount is bought and stored in insured vaults by the seller. This process ensures a safe and authentic investment for the investor. Additionally, by investing in digital gold, users can own fractions of physical gold rather than having to buy them in the form of coins, jewelry, bricks, etc and paying a lump sum amount immediately or setting up installments that would include interest. Fractional ownership allows investors to expand their portfolios within reasonable means and allows them to explore various diverse options.
Liquidity is another advantage of holding digital gold. These assets have no lock-in periods and can be redeemed anytime which makes them highly liquid. They also do not have specific time periods where they can be traded and are available 24X7 for buying, selling, lending, etc. Users can also expect augmentation of their investments as the gold prices increase as digital gold is dependent on market prices.
Various FinTech firms including OroPocket also have products and services that allow users to invest in the space easily at little to no cost. Particularly in blockchain technology, security, transparency, and authenticity become inherent features. Therefore, with our firm, users can expect robust and safe infrastructures that protect their data and their investments.
DQ: Now that crypto is emerging as a promising alternative to gold as a store of value—where would you reckon digital gold in this spectrum of choices?
Tarusha Mittal: We would not say that cryptocurrencies or crypto assets are an alternative to gold as being at the intersection of both these sectors, we feel that these assets complement each other quite well.
With the crypto sector, digital assets can be navigated easily and can add to the robustness of the digital space. Asset tokenization has acquired ample interest due to the amalgamation of physical and digital worlds. Hence, as a firm that specializes in tokenizing real-world assets including digital gold, and allowing its users to utilize their investments in the form of payments for everyday expenses, we have witnessed the potential of a hybrid world of traditional and digital systems.
All in all, it is an individual choice, some people believe in the store of value of BTC while others believe in gold. Personally, a good mix within your investment portfolio is always a better choice.
DQ: Are our current digital gold options easy for customers when it comes to time limits of virtual storage, ease of swapping for physical gold, and specific regulatory protection? What about extra costs on physical delivery, making charges, taxes, insurance, and other admin fees?
Tarusha Mittal: Digital gold can be held by users for a maximum period of 5 years but even if an investor wants to continue holding the asset, they can opt for paying a minor fee of 1 percent on total accumulated value per annum as storage and insurance charges.
Digital gold enables investors to have quick redemption options usually through the application itself. This reduces the hassle of administrative processes or involving middlemen who are then entitled to a monetary commission. With our application, OroPocket itself, we allow instant redemption by way of allowing users to utilize their investment amount for everyday transactions by way of asset-backed banking cards or UPI.
As opposed to physical gold or sovereign bonds, digital gold ensures that there are little to no additional costs made for buying or holding them. This poses a highly affordable and efficient investment for small-scale and personal investors.
Coming to extra costs on physical delivery, making charges, taxes, insurance, and other admin fees, this solely depends upon the quantity of gold we are looking at.
Digital gold might not involve holding or mining physical gold in real-time by the investor, but it still needs to be backed up by its physical counterpart, which involves mining.
DQ: Any implications we need to be aware of after the SEBI advisory for RIAs?
Tarusha Mittal: As for SEBI’s advisory for RIAs, only brokerage houses have been told to stop selling digital gold. Other than that there are numerous players in the market who offer digital gold investing services due to their ease and demand.
DQ: What technologies are helping the surge of digital gold? How far are we on the spectrum of decentralisation, disintermediation, and privacy thanks to Blockchain?
Tarusha Mittal: The technology sector has been a hotbed of innovations in recent years. From smartphones to the metaverse, the technology landscape has revolutionized comprehensively. India had already been moving towards robust digital payments and FinTech infrastructures with demonetization. Furthermore, with the pandemic, it became imperative to have easy, affordable, and quick paperless payment solutions. Apart from FinTech, with the development of blockchain and other emerging technologies, we have ensured constant innovation and sophistication that further improves the FinTech sector. We are using blockchain for more transparency and security.
Decentralisation has been a core aspect of buying gold because people usually want custody to themselves – that is decentralisation at its best. Being in between the traditional and decentralized worlds, we have witnessed the growth of this sector into a highly secure, trustless, and accessible system that ensures we can provide financial freedom to our users at all stages.
DQ: Is digital gold a strong answer to sustainability issues and mining-related criticisms of traditional gold?
Tarusha Mittal: With increased awareness facilitated by easy access to vast stores of information through our smartphones, we are making conscious efforts into keeping our world greener. The finance sector has also started offering green bonds or carbon credits to encourage businesses and individuals into making ‘greener’ decisions. Digital gold might not involve holding or mining physical gold in real-time by the investor, but it still needs to be backed up by its physical counterpart, which involves mining. While storing in vaults doesn’t crack sustainability right now, the carbon footprints certainly get reduced with digital gold. There is still a long way to go but as the world is evolving, we feel solutions are coming our way sooner rather than later.
From smartphones to the metaverse, the technology landscape has revolutionized comprehensively. India had already been moving towards robust digital payments and FinTech infrastructures with demonetization
DQ: Any specific adoption segments or trends (like HNIs or Millennials) that you have observed here?
Tarusha Mittal: Gold as a digital asset has seen rapid growth recently. According to the Association of Mutual Funds in India, the number of gold ETFs has increased from 3.1 Lakh to 24.11 lakh between September 2018 to September 2021. This significant jump is a testimony to the overall Indian demographic sentiment towards digital gold. Investors, be it high net worth individuals or millennials, both are aiming to diversify their portfolios by exploring new active markets. There is a healthy mix in this sector as long-time investors do recognize the potential behind gold as an asset and millennials look at digital gold as a means of owning this reliable asset without being concerned about its safety and storage.
With OroPocket, we have observed a trend of millennials investing in digital gold and silver. The digital gold investment option coupled with the security of blockchain technology has been appealing to youngsters who are a major demographic in the blockchain sector.
While Millenials are the target, HNI too is potential target customers. More Millenials are starting and sustaining their wealth creation journey because they are looking beyond storing money in banks.
Tarusha Mittal is COO & Co-Founder, OroPocket
By Pratima Harigunani