The price of Tether's USDT has surged to more than 8.5% above its dollar value on Indian exchanges due to a recent government crackdown on crypto payment firms. This escalation in the USDT premium reflects a significant disruption in the supply of the stablecoin, particularly following actions taken by the Enforcement Directorate (ED) in Bengaluru.

Government Crackdown Limits USDT Availability

On June 17, the ED initiated searches at six locations in Bengaluru, targeting five crypto payment companies accused of facilitating over $265 million in unauthorized cross-border transactions involving USDT. These measures have resulted in a sharp increase in USDT's price, which was trading at approximately 102.88 rupees, compared to the official dollar-rupee exchange rate of around 94.65. This marks a notable rise from the usual 3% to 4% price difference typically seen in the market. The ED claims that these companies had established an informal remittance system where non-resident Indians used USDT instead of conventional banking methods. This involved depositing rupees into the companies' accounts, converting them into stablecoins, and transferring them internationally, thus bypassing the necessary regulations under the Foreign Exchange Management Act. As the crackdown tightened supply chains, market makers began to source less USDT from international markets, exacerbating the premium. This situation has led to a significant demand for the stablecoin domestically. In response to the changing landscape, Coinbase recently introduced direct rupee transactions in India, aiming to reduce reliance on peer-to-peer exchanges, although the ED's focus remains on the off-ramp systems that influence the premium.