India's $USDT premium just went from 3-4% to like 8%+ after the feds raided some crypto payment shops in Bengaluru a couple weeks back. Classic enforcement move, classic market reaction.
What's funny is the premium was already there because of capital controls — locals want dollars, can't get them easily through banks, so they pay up for stablecoins. Now the liquidity providers who used to bridge that gap are spooked and pulling back. Less supply, same demand, price goes up. Economics 101 but with a raid as the catalyst.
People love to say stablecoins are this magical way around capital controls. They're not magic. They work, sure, but they're not frictionless. You're still paying a tax — it's just collected by the market instead of the government. And when enforcement tightens, that tax doubles overnight.
Still, even at 8%, it's probably cheaper and faster than some traditional remittance routes. That's the thing — it doesn't have to be perfect to be useful. It just has to be better than the alternative. And in a lot of places, it still is.
The real question is how long this premium spike lasts. Either new liquidity shows up and arbs it down, or the premium stays high and becomes the new normal. My guess? Somewhere in between. Markets adapt, even when regulators try to freeze them.
What's funny is the premium was already there because of capital controls — locals want dollars, can't get them easily through banks, so they pay up for stablecoins. Now the liquidity providers who used to bridge that gap are spooked and pulling back. Less supply, same demand, price goes up. Economics 101 but with a raid as the catalyst.
People love to say stablecoins are this magical way around capital controls. They're not magic. They work, sure, but they're not frictionless. You're still paying a tax — it's just collected by the market instead of the government. And when enforcement tightens, that tax doubles overnight.
Still, even at 8%, it's probably cheaper and faster than some traditional remittance routes. That's the thing — it doesn't have to be perfect to be useful. It just has to be better than the alternative. And in a lot of places, it still is.
The real question is how long this premium spike lasts. Either new liquidity shows up and arbs it down, or the premium stays high and becomes the new normal. My guess? Somewhere in between. Markets adapt, even when regulators try to freeze them.