Key facts
- Tether's USDT stablecoin is trading at an 8.5% premium on Indian crypto platforms.
- The premium surge follows a crackdown by India's Enforcement Directorate on five crypto payment firms.
- These firms are accused of facilitating over $265 million in unauthorized cross-border transfers using USDT.
- The Enforcement Directorate's actions have reduced the supply of USDT in India.
- The premium reflects strong local demand for stablecoins as an alternative to traditional remittance.
The price of Tether's USDT stablecoin has surged to over 8.5% above its dollar peg on Indian cryptocurrency platforms, driven by a crackdown on crypto payment firms that has choked off the token's supply. India's Enforcement Directorate (ED) searched six premises in Bengaluru on June 17, accusing five crypto payment firms of facilitating more than $265 million in unauthorized cross-border transfers using USDT.
The ED alleges these firms operated an informal remittance channel, allowing non-resident Indians to use USDT as an alternative to bank wires. Funds were deposited, converted to stablecoins, sent internationally, and sold on Indian exchanges, bypassing formal regulatory procedures under the Foreign Exchange Management Act (FEMA) and anti-money-laundering laws. This method had been popular for approximately two years due to faster, cheaper transfers and the benefit of the standing premium.
The premium widened significantly after the ED's announcement, as market makers and liquidity providers, responsible for sourcing USDT from abroad, reduced their overseas purchases. This action directly impacted the domestic supply of the stablecoin, just as the "off-ramp" infrastructure—the means to convert crypto back into local currency—came under pressure. While exchanges like Coinbase have introduced direct rupee payment channels, the ED's focus on off-ramp infrastructure remains a key factor in the current premium.