India’s USDT premium surges past 8.5% as enforcement action squeezes supply
The price gap between Tether’s USDT and the rupee widened sharply over the weekend, with USDT trading at 102.88 INR on local platforms while the USD–INR interbank rate closed at 94.65 INR — a premium of more than 8.5%, roughly double the typical 3–4% range. The spike follows recent enforcement activity that has disrupted onshore stablecoin flows and thinned market liquidity.
What happened
- On June 17 the Enforcement Directorate (ED) raided six premises in Bengaluru as part of an investigation under the Foreign Exchange Management Act (FEMA). The ED alleges five crypto payment firms facilitated more than 2,500 crore INR (~$265 million) in unauthorized cross-border transfers using virtual digital assets.
- Investigators say non-resident Indians routed rupees into company accounts, converted the funds into USDT, transferred the stablecoins overseas and then sold them back on Indian exchanges — a model that reportedly bypassed FEMA and Prevention of Money Laundering Act (PMLA) requirements.
- That model reportedly operated for about two years because USDT transfers were faster, cheaper and — given the domestic premium — often yielded more rupees than conventional remittances.
Market impact
- After the ED raids, market makers and liquidity providers cut back on overseas USDT purchases, tightening supply inside India and pushing the domestic premium higher.
- The premium rise creates a larger arbitrage window but also signals elevated execution risk for participants who rely on cross-border stablecoin flows for remittances or liquidity.
Regulatory backdrop and wider scrutiny
- The move comes as India tightens oversight of virtual digital assets (VDAs). The Reserve Bank of India has repeatedly warned about crypto and stablecoin risks.
- Global watchdogs are also flagging concerns: the Financial Action Task Force’s March 2026 report said stablecoins accounted for 84% of the $154 billion in illicit virtual asset transaction volume recorded in 2025, citing their liquidity and interoperability.
- Domestically, the Financial Intelligence Unit has asked major exchanges to preserve records of over-the-counter (OTC) crypto transactions above $10,000 from January 2026 onward, emphasizing beneficial ownership, source-of-funds and destination wallets.
- Tax authorities have stepped up compliance: India’s Income Tax Department said it issued more than 44,000 notices after identifying over 888 crore INR in undisclosed VDA income using exchange data, TDS filings and investor returns.
What’s next
- Policy discussions are imminent: the Parliamentary Standing Committee on Finance is scheduled to meet the Reserve Bank of India and the Institute of Chartered Accountants of India on July 2 to discuss India’s approach to regulating VDAs. The outcome could shape how remittances, stablecoins and exchange operations are supervised going forward.
Despite enforcement, adoption grows
- Enforcement and compliance drives are occurring alongside rapid market growth. India ranked first in global crypto adoption for the third consecutive year in 2025, and TRM Labs reports South Asia’s crypto transaction volume rose about 80% year-on-year to roughly $300 billion between January and July 2025.
Bottom line: The ED action has tightened onshore USDT supply and pushed the domestic premium to multi-month highs, underscoring how regulatory enforcement — and forthcoming policymaking — can quickly reshape stablecoin liquidity and remittance channels in India.
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