There is an important SEBI informal guidance ("Guidance") which supports the digital gold app models. Tata and start-ups like Jar have such a model . Here one can buy "fractional" and "digital" gold- this is not a construct or an asset that lives online only (unlike NFTs). This is a model where the business or "app" actually buys real gold against these investments- one can have the gold back. The existing businesses of this type are typically silent on pricing or returns.
The problem statement for such a business model is this: when a business model pools assets (say gold and then distributes fractional gold) - or art and then distributes to the buyers then there is a risk of this falling under a "CIS" scheme. A CIS scheme is a collective investment scheme which according to SEBI needs to be registered. As this is cumbersome in many ways, the strategic outlook is to structure a business to not be a CIS.
SEBI offers informal guidances on a wide variety of areas which are specific to the case- yet the logic is useful for all. These guidances provide a valuable view into the regulatory thought- also as a fair regulator, the principles as shared publicly through these guidances are expected to be not deviated from.
In 2013, SEBI issued a little known but critical informal guidance. It is enclosed here and is an easy read. This did not have a gold app- but the facts were very similar.
The 2013 Guidance focused on to SEBI (Collective Investment Scheme) Regulations and held that a similar model- it involved gold investments- "app" or not is irrelevant in law- was fine and not a CIS. These principles were useful to help ensure the model did not fall into a CIS:
1. The business did not actively promise returns;
2. There was no pooling of user/investor resources; and
3. Each user investment was a separate contract: not a pool.
It also helped that the business had KYC (not required one way or other for CIS analysis) and in similar strain that the model was common people invest in fractional gold.
This business model + fine print = safe harbour from CIS.
It is highly relevant therefore (and not in any printed law) to keep in mind that it is best to avoid been seen as promising returns (e.g. get 110%, or "20% return guaranteed") and directly link the user investment to the asset (in other words: unpool). It helps to undertake a measure of KYC though this is not a real legal requirement.
This is useful to any "app" or conventional model which potentially pools any assets, from art to scooters, from gold to sandalwood trees. Yes, pooling of sandalwood trees among investors in the 1990s is an interesting backstory to this.
None of this is linked or relevant to SEBI's recent interesting draft for gold exchanges.