Supply crunch lifts stablecoin premium above 8.5% in India

Mumbai: There's a sudden scarcity of stablecoins, the legal tender of the crypto world, in India.

Better known as USDT, the price of this sought-after digital asset has surged since a week in the local market.

Internationally, the USDT - issued by Tether, the firm that mints it against dollar payments - mirrors the greenback, with one USDT pegged to equal a dollar. But in India, USDT commands a premium over the inter-bank dollar-rupee exchange rate due to the absence of domestic crypto sources and mining.


This premium, usually 3-4%, has now crossed 8.5%. On Saturday, USDT was quoted ₹102.88 compared with the USD-INR closing at 94.65 in the Indian forex market Friday.

Significantly, the USDT premium started hardening soon after the Enforcement Directorate (ED) crackdown on entities which facilitated the use of USDT by the Indian diaspora and parties avoiding banks in less kosher transactions to move money in and out of the country. Instead of wiring dollars through banking channels, many NRIs moved USDTs for sending funds to families here. It was quicker, cheaper, and generated more rupees when sold in India (compared to conversion of dollars transferred through banks) - thanks to the USDT premium and charges banks impose.

Along with some dubious money movements, this USDT-based remittance model, flourishing for past two years and supplying USDT into India, is now under threat. The reason: ED, which administers Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA), believes that such cross-border USDT (or any crypto) transfers violate FEMA even if funds are not tainted.

DIP IN SUPPLY?

The dip in USDT inflow and fears of further slowdown in future is understood to have shrunk supply and pushed up stablecoin premium in India. Indeed, the spike in premium can also be attributed to less USDT purchases from abroad by crypto market-makers and liquidity generators in India following ED's statement a fortnight ago on the ₹2500-crore money-transfers through virtual digital assets (VDAs).

According Purushottam Anand, founder of the law firm Crypto Legal, "Indian exchanges have long traded most of the VDAs at a premium to global rates. The recent uptick may, in part, reflect a risk premium that builds when regulatory clarity is lacking. As the cross-border transactions draw closer scrutiny without settled rules, participants tend to price in that uncertainty, and the premium widens. This underscores a wider point: in the absence of clear legal and regulatory guidance, ambiguity itself becomes a cost the market bears."

In the crypto universe, USDT is a currency to swap or buy other coins. The premium in India inches up when traders buy stablecoin to acquire top cryptos like Bitcoin or Solana - though such trades can't fully explain the sharp rise in premium.

ED's impact on premium is playing out as OECD and Bank for International Settlements underscore the need for regulations to curb crypto misuse, and India debates future policies.

"The Parliamentary Standing Committee on Finance is meeting RBI and ICAI on July 2 to discuss the way forward. OECD has pointed out India's huge crypto flows after Korea and Vietnam. Besides ED, there's FIU scrutiny of crypto OTC deals (off-market trades). With FATF reporting that stablecoins accounted for 84% of $154 billion illicit virtual asset transactions in 2025, regulation is no longer optional. As crypto related scams rise, New Delhi's focus on VDA regulation is a welcome and urgent move," said Sudhakar Lakshmanaraja, founder of Digital South Trust, a Web3 policy advocacy body.