Tether, the biggest stablecoin in the world by market cap, turned volatile in India against the backdrop of regulatory uncertainty. Smart traders profited from the price instability instantly, CoinDesk reported.
This shouldn’t have happened as the cryptocurrency is supposed to be pegged to the USD 1:1, which means 1 USDT should always equal $1 or 74.37 rupees according to the current exchange rate. Despite that, USDT inexplicable crashed today, dropping to as little as 60 rupees on the WazirX exchange in Mumbai.
Indian government seeks to ban all private crypto
The Lok Sabha, India’s lower house of Parliament, announced that a bill seeking to ban all private cryptocurrencies could be tabled for discussion as soon as next week. Traders swooped in and bought Tether at a discount. A trader told CoinDesk via WhatsApp:
There was an arbitrage opportunity in buying USDT at Rs. 60 to sell it at the peg or premium. I purchased tether around Rs. 62 on CoinDCX exchange. Later, the stablecoin regained its previous levels of around 74 rupees on Indian exchanges.
Sudden trading spurt caused glitches
According to Indian crypto asset manager MintingM, few traders were able to take advantage of the mispricing because the unexpected trading volume spurt caused technical issues on major exchanges. Security expert Mudit Gupta told CoinDesk on Twitter that mainly small traders took advantage of the mispricing:
Since crypto is in the grey area [in terms of lack of regulatory clarity], no big market maker touches it in India.
Not the first time
Due to high demand, Tether typically trades at a premium of around 5% on exchanges in India. What’s more, this isn’t the first time this has happened. The stablecoin lost almost 20 rupees in value in January, when Lok Sabha announced it had put a bill to outlaw cryptocurrency on the government’s parliamentary agenda. The bill never came up for discussion and the decline was reversed.
Bill to facilitate digital rupee
The content of the bill to be introduced as early as next week reflects that of the January bill, which aimed to ban private crypto while supporting the development of a digital rupee, which the Reserve Bank of India will be issuing.