The rupees were deposited into company accounts, converted to stablecoins, sent across borders and sold on Indian exchanges, the agency said, avoiding the paperwork and approvals required by formal funds transfer routes under FEMA and India’s anti-money laundering law.
The model worked for about two years, attracting users because stablecoin transfers were faster and cheaper than banking routes and, thanks to the standing premium, converted into more rupees upon arrival.
The premium rose because the crackdown directly affected supply. After the ED announced its action, market makers and liquidity providers, companies that source tokens from overseas to sell on local platforms, backed away from buying USDT abroad, constricting the domestic pool just as the exit routes that fed it came under pressure. An off-ramp is the way forward to convert crypto back to local cash.
As such, major exchange Coinbase launched direct rupee rails in India last month, reducing reliance on peer-to-peer trading, although the ED’s action targets the egress infrastructure that generates the premium.
