India ED Raids Cut USDT Inflows, Lifting Premium to 8.5% Under FEMA Enforcement

The raids under the Foreign Exchange Management Act disrupted informal remittance channels that converted rupees to USDT offshore and back into Indian exchanges. Firms deposited local currency, issued stablecoins abroad, and repatriated value outside bank rails, avoiding RBI reporting and FEMA approvals. Supply tightened as market makers reduced purchases, doubling the typical 3-4% premium observed in prior months.

India maintains strict capital controls to defend the rupee amid reserve pressures and parallel demand for dollar assets. Non-resident remittances and domestic buyers seeking stable value outside formal channels created persistent USDT demand. The premium reflects this mismatch rather than speculation alone, as local platforms absorbed tokens faster than new inflows arrived after the enforcement actions.

Prior patterns show similar spikes during 2018-2019 RBI circulars and 2022 PMLA amendments, each time resolved only after new licensed on-ramps emerged. Coinbase's recent rupee integration provides one channel, yet it does not address the off-ramp volume previously handled by the targeted entities.

The ledger shows short-term contraction in informal flows alongside sustained local demand, indicating any narrowing of the premium requires either expanded authorized rails or reduced capital outflow pressure.