Changes are occurring in the way some Indians working abroad send money home. For about two months now, a small portion of the funds sent by overseas workers have been arriving as stablecoins rather than traditional bank transfers.
USDT trades at a 4-5% premium in India, making crypto transfers more valuable than bank transfers. USDT acts as a proxy for the dollar, while the current INR-USD exchange rate is ₹88.6 per dollar, while in India its price is hovering around ₹93.
Premiums create arbitrage opportunities
This creates economic benefits for senders. $1,000 remitted by a worker from the UAE or the US through regular banking channels is converted to 88,600 ₹. However, USDT bought in Dubai or New Jersey and sold in India will sell for ₹93,150 based on the recent USDT price of ₹93.15 per coin.
Foreign workers visiting currency exchange offices may not understand the arbitrage opportunities. Instead of sending money to a bank, operators buy USDT and move the tokens to their counterparty’s wallet in India.
Recipients can sell their coins in peer-to-peer transactions, where crypto buyers and sellers connect on Telegram or other unregulated platforms, and avoid the 1% tax withheld. Alternatively, the recipient can sell on the local exchange, pay TDS and keep the additional money split with the customer.
While customers send more money to their families, money exchangers earn additional fees. Although they operate outside formal channels, transactions are faster and cheaper than banks. Several remittance companies have informally discussed the issue with Reserve Bank of India officials. Market estimates indicate that around 3-4% of remittances have migrated from banks to stablecoins.
Regulatory framework remains unclear
Purushottam Anand, advocate and founder of Crypto Legal, said, “Money transfer providers in several jurisdictions are now allowed to process payments in cryptocurrencies, including fiat currencies and stablecoins.” “For example, a company with a remittance license in the US can accept USD, convert it into a stablecoin, and send it to a beneficiary’s digital wallet in India.”
These are still in their infancy, and the flow of funds is not large enough to cause banks much concern. Crypto industry insiders say the trend may have been caused by increased demand for USDT in India.
The use of USDT is increasing to hedge against cryptocurrency volatility. Traders sell other cryptocurrencies and use the proceeds to buy stablecoins. Betting on real money games on offshore platforms is also increasing demand for stablecoins. This maintained the premium and created a market for USDT from abroad.
Related: India, not the US, will be the retail engine for crypto in 2025, new data shows
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