Key facts
- Tether's USDT stablecoin is trading at a 7% to 10% premium on Indian crypto exchanges.
- The premium is attributed by exchange executives to local demand outpacing available supply and thin liquidity.
- The premium spike followed enforcement actions by India's Enforcement Directorate against crypto payment firms.
- USDT's premium normally ranges between 3% and 4%.
Tether's USDT stablecoin has seen its price surge to a 7% to 10% premium on Indian cryptocurrency exchanges, a significant increase from its typical 3% to 4% range. Executives from major Indian exchanges, CoinDCX and CoinSwitch, attribute this premium to a simple demand-supply dynamic and thin local liquidity, rather than any platform-specific pricing or hidden fees. The price adjustment occurs when local demand for USDT outpaces the available supply of sellers willing to transact at the global dollar reference price.
This premium spike follows enforcement actions by India's Enforcement Directorate (ED) against five crypto payment firms accused of facilitating over $265 million in unauthorized cross-border transfers using USDT. While exchange executives focused on market mechanics, the ED's actions are understood to have reduced the overall supply of USDT in the Indian market, potentially exacerbating the supply-demand imbalance. Market makers and liquidity providers may have scaled back their overseas sourcing of USDT following the regulatory scrutiny, leading to a shortage of tokens available for trade on local platforms.
Factors such as India's flat 30% tax on crypto gains, no allowance for loss offsets, and a 1% tax deducted at source (TDS) have previously contributed to market dislocations for crypto participants operating in the country.