Indian Exchanges Attempt To Bypass Reserve Bank’s Ban On Crypto, Now Offering Support For Tether (USDT), TrueUSD (TUSD)

Omar Faridi
  • Indian crypto exchanges have started listing stablecoins Tether (USDT) and TrueUSD (TUSD).
  • "Tens of thousands" of new local crypto traders have registered after the stablecoins were added.
  • Stablecoins may be used to bypass the Indian Reserve Bank's ban on crypto.

An increasing number of digital asset exchanges in India have started to list stablecoins such as Tether (USDT) and TrueUSD (TUSD). It appears that this could be an attempt by local exchanges to reduce the negative impact on India’s crypto economy, as the country’s reserve bank (RBI) has prohibited financial institutions from offering banking services to those dealing in digital currencies.

Exchanges Add Stablecoins Tether (USDT), TrueUSD (TUSD)

Last week, Unocoin, a major Indian cryptocurrency exchange, announced that it would support TUSD on its Unodax trading platform. TUSD is an ERC-20 token, which was developed on the Trusttoken platform, and each TUSD is said to be redeemable 1-for-1 for US dollars.

Currently, Unodax is reportedly offering support for 23 different TUSD trading pairs, which include Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP). According to Inc42, an Indian media company, “the decision [to list TUSD] has been taken to minimize the RBI circular’s impact on [local] cryptocurrency investors and traders.”

“Plausible Solutions” To RBI’s Ban

As reported by CryptoGlobe, the RBI instructed all local banks on April 6th to stop offering banking services to crypto-related businesses and individuals looking to convert digital currencies to fiat (or vice-versa) through exchanges.

Sathvik Vishwanath, the CEO of Unodax, explained:

After the RBI banned bank transfers for crypto trading and investments, we were looking for the plausible solutions to help our users continue to hodl, without any disruptions and hassles.

Vishwanath added that with stablecoins such as TrueUSD, users would have a reliable medium of exchange for other digital assets as it would help “minimize their risks in a volatile [crypto] market.”

Zebpay, a leading Indian crypto wallet and exchange service, also recently announced that it would begin listing TUSD on its trading platform. At present, Zebpay is offering support for only two trading pairs: BTC-TUSD and TUSD-INR (Indian Rupees). Users looking to transact in TUSD on Zebpay will reportedly not be charged withdrawal fees until August 31st, 2018.

“Tens Of Thousands” Of New Crypto Traders

Other popular Indian exchanges such as Wazirx have started offering exchange-escrowed peer-to-peer (P2P) services that allow users to make deposits and withdrawals with INR by using Tether (USDT). USDT was created by Tether Limited and the company claims that each USDT is backed by one USD held in reserve. Moreover, USDT uses a specialized cryptocurrency and communications protocol called Omni Layer, which was developed on the Bitcoin blockchain.

While there has been some controversy regarding Tether’s USDT, its demand does not seem to have been affected. Notably, Wazirx’s new USDT escrow service has become quite popular in India, as the exchange’s CEO Nischal Shetty revealed that “tens of thousands” of new traders registered on the exchange after it began offering the P2P crypto escrow service.

Commenting on USDT’s ability to increase liquidity on exchanges, the WazirX CEO noted that extreme fluctuations in cryptocurrency prices was not something their trading platform could control. However, by offering users a stablecoin such as USDT, crypto investors could potentially be able to take advantage of the token’s relatively high liquidity and stable price.

Several other Indian cryptocurrency exchanges such as Zecoex, Coindelta, and Koinex have also recently added support for USDT and/or TUSD.

Bitcoin Trading at $600 Premium in India as Potential Ban Looms

Bitcoin (BTC) is currently trading at a roughly $600 premium in India, according to the market price available on the rupee-based exchange BitBns.com.

At the time of writing, bitcoin trades for just under 8 lakh rupees, or 800,000 INR, which is nearly $11,500 - significantly more than the going dollar price of $10,860.

This extreme price premium can be attributed to the difficulty of buying crypto in the country. As of last year, all regulated Indian banks and financial institutions have been banned from transacting in, and offering services related to crypto.

But the environment could soon become even more hostile.

CryptoGlobe reported in late April that a government working group made up of Indian tax, consumer protection, and general economic ministries had recommended a complete ban on even transacting or owning cryptoassets, much less integrating them into the mainstream, legal economy.

Bitcoin Demand Strong in India?

BitBns, one of the few operational rupee-denominated exchanges remaining, has apparently been able to skirt the increasingly draconian environment by allowing users to conduct their own P2P market, facilitated by the website, in order to buy and sell in Indian rupees. Other popular Indian exchanges, like Coindelta, have been forced to shut down.

The high premium may suggest a healthy demand in India for bitcoin and other cryptoassets, as Indians without international banking connections are forced to use the local currency to buy crypto. Data from crypto analytics website Coin.dance show that another popular crypto-fiat P2P platform, LocalBitcoins, has seen a sharp uptick in Indian trading volume since March-April.

indialocalbitcoins.png(source: Coin.dance)

CryptoGlobe reported last month that volumes were not affected by, and even increased in spite of, the threat of a crypto ban.

Indian Government Measures

One recent instance in particular shows just how far the Indian government seems to be going to control the Indian economy.

In late 2016, the national government suddenly and without warning even to its own ministries, declared that all 500- and 1,000-rupee banknotes currently in circulation were null and void - in an action that is known in India as “Demonetization.” These notes represented more than half of the physical money then in circulation in the country.

While the stated aims of the action were to root out corruption and “black money” from the economy, Demonetization has often been panned as a disastrous failure that cost 1% of the country’s GDP, a loss of 1.5 million jobs, and hurt the poor most of all.