Executives at leading Indian exchanges CoinDCX and CoinSwitch say the spike in USDT premiums is being driven by a demand-supply mismatch, amplified by limited local liquidity.
Tether (USDT), the world’s largest dollar-backed stablecoin, is trading well above its peg on Indian platforms. While some reports tied the surge to recent enforcement activity, exchanges say the pricing reflects basic market dynamics.
Over the weekend, USDT traded at a 7%–10% premium, at one point reaching around ₹102.88 compared to an official USD-INR rate near ₹94.65. Typically, the premium ranges between 3% and 4%, representing the extra rupees paid for dollar exposure via crypto instead of traditional banking channels.
The move followed action by the Enforcement Directorate involving USDT-linked transactions, though exchanges emphasize tightening supply as the primary driver.
Minal Thukral of CoinDCX said local pricing is determined by order-book depth relative to global benchmarks. With India structurally a net crypto buyer, rupee demand often exceeds available sell-side liquidity. When liquidity near global price levels is thin, prices adjust upward until equilibrium is reached.
In simple terms, more buyers are chasing USDT than sellers are willing to provide at global rates, pushing prices higher.
Ashish Singhal, co-founder and CEO of CoinSwitch, said the premium is not platform-specific and is not set by exchanges. Instead, it reflects broader liquidity conditions and the availability of dollar-backed assets. He noted that similar premiums have appeared in other markets during periods of strong demand or constrained supply.
On CoinSwitch, USDT has traded at roughly a 9% premium in recent days, consistent with the broader trend across Indian exchanges.
Both exchanges attribute the premium to organic market forces—strong demand, limited supply, and thin liquidity—rather than any exchange-driven pricing.
While neither executive directly commented on the enforcement action’s impact, it may have tightened supply. Market makers could have reduced USDT inflows from overseas, contributing to the liquidity squeeze.
India’s regulatory environment—including a 30% tax on gains, no loss offsets, and a 1% tax deducted at source—has also made it harder for market makers to operate efficiently, contributing to recurring market dislocations.
