India USDT premium soars above 10%! Exchange: Not manipulation, but supply-demand imbalance.

The world's largest dollar-pegged stablecoin USDT has shown an unusually high premium in India, once surging to 10% above its face value. An exchange executive pointed out that this is due to an imbalance between Indian demand and liquidity supply, and enforcement actions may have widened the supply-demand gap.
(Background: Spark partners with Uniswap to launch stablecoin swap infrastructure FX Layer)
(Context: Tether's gold token XAUT will be available for collateralized loans, turning $23 billion in gold reserves into active capital)

Table of Contents

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• Supply-Demand Imbalance: More Buyers Than Sellers
• Enforcement Actions Widen the Supply-Demand Gap
• India's Structural Disadvantage: 30% Tax Rate Plus 1% TDS
• Taiwan Also Has a Similar "Premium Effect"

The premium for USDT, the world's largest dollar-pegged stablecoin, on Indian crypto exchanges surged to between 7% and 10% over the weekend. For the world's largest dollar-pegged stablecoin, this means Indian buyers paid nearly 10% more than the dollar face value when purchasing USDT with Indian Rupees. At one point, USDT was quoted at approximately ₹102.88 against the dollar, while the official USD to INR exchange rate was around 94.65, representing a premium of 8.7%.

The premium for USDT usually remains between 3% and 4%. Simply put, this is an additional "premium tax" paid by Indian buyers to gain dollar exposure through USDT, compared to the cost of converting currency through banks.

Supply-Demand Imbalance: More Buyers Than Sellers

Minal Thakur, Vice President of CoinDCX, the largest exchange in Mumbai, told CoinDesk that the price of USDT in India is determined by "local order book depth" and "the global dollar reference price."

"India is structurally a net crypto-buying country, with local Rupee buying often outpacing seller liquidity. When liquidity near the global reference price thins, the market clearing price naturally moves upward," Thakur said.

She added that the premium level is essentially a signal of the "local arbitrage range," reflecting the cost and speed for liquidity providers to replenish supply and narrow the spread.

Ashish Singhal, Co-founder and CEO of CoinSwitch, gave a similar explanation, emphasizing that the premium is not set by the exchange: "Like any actively traded asset, when demand exceeds supply, the price adjusts naturally. The USDT premium is not a phenomenon unique to a single platform but reflects overall market dynamics, including liquidity conditions and the availability of dollar-denominated digital assets."

Enforcement Actions Widen the Supply-Demand Gap

Both exchanges attributed the premium to supply-demand imbalance, but neither directly mentioned the catalyst: recent enforcement actions by India's Enforcement Directorate (ED) regarding USDT payments.

CoinDesk reported on Monday that India's financial crime agency has taken action against USDT payments, tracing the flow of stablecoins. Although exchange executives did not directly confirm a causal link between enforcement and the premium, it is reasonable to infer that market makers and liquidity providers reduced the introduction of USDT from overseas after the enforcement action. In terms of data, this manifests as a "supply-side liquidity shortage," which is precisely the mechanism described by Thakur and Singhal.

India's Structural Disadvantage: 30% Tax Rate Plus 1% TDS

This is not the first time India has seen a stablecoin premium. Liquidity providers on Indian crypto exchanges have long faced an unfavorable tax environment, including a 30% capital gains tax, no loss offsetting, and a 1% Tax Deducted at Source (TDS). These rules compress market makers' profit margins, making price discovery in the Indian crypto market less efficient than in other Asian markets.

For comparison, Thailand's crypto tax rate is 15%, South Korea's is 6%, and Vietnam does not impose capital gains tax. India's tax structure is among the heaviest in Southeast Asia and emerging markets, which explains why the USDT premium is particularly prone to widening in India.

Taiwan Also Has a Similar "Premium Effect"

Although the stablecoin market in Taiwan does not show a clear premium like India's, there is still a "hidden premium." The bid-ask spread for BTC and USDT on exchanges usually remains between 0.05% and 0.1%, but during large transfers or holidays, the spread may widen to over 0.3%. India's current premium of 7% to 10% is 20 to 100 times larger than Taiwan's spread, highlighting an extreme case of liquidity gaps in emerging markets.

This USDT premium event reminds investors that the "stability" of stablecoins is relative. In markets with ample liquidity, 1 USDT truly equals 1 US dollar; but in emerging markets with supply-demand imbalances, 1 USDT could be worth up to 1.1 US dollars.