THE INDIAN USDT PREMIUM, EXPLAINED

Summary from the TLDR Crypto newsletter

The persistent ~6% premium for USDT in India isn't a retail quirk, it's a shadow exchange rate driven by capital controls and gold smuggling economics. India legally taxes imported gold at 6%, and historically, smugglers bypassed this using the hawala system to move money offshore. Today, hawala has upgraded to USDT as people with unreported cash buy Tether at a premium in India to pay gold suppliers abroad, pushing USDT above the RBI-managed INR/USD rate. The premium tracks the gold duty almost perfectly, as when the tax was 15%, the USDT premium was ~15% and when the tax dropped to 6%, the premium fell to ~6%.