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Forget INR, India Gears Up to Trade Crypto in USD Backed Stable Coins

In the past couple weeks, Indian exchanges have announced listing of stable coins like USDT or TUSD. USD Tether (USDT) and True USD (TUSD) are both digital currencies pegged to the US$ in value. Hence 1 USDT/TUSD will always be equal to 1 USD.

Koinex listed TUSD. Bitbns and coindelta listed USDT. Coindcx listed TUSD over a month ago. Coindelta even experimented with listing another stable coin DAI. Even DAI equals a dollar. There is a difference in all these currencies, we will get there in a minute.

Bidding GoodBye to INR Pairs

With the RBI’s order now in place, banks are closing the bank accounts of exchanges. At the time of this writing 7 major exchanges have shut down INR Deposits and withdrawals in India. The one intention behind listing stable coins is that eventually these stable coins can replace INR based trading.

Today you can trade Bitcoin, Ethereum and other crypto assets against the Rupee. A user deposits INR, buys Crypto or Sells crypto in INR and withdraws INR. But when the exchanges lose their ability to cater INR deposits and withdrawals, the INR trading will shut down on these spot exchanges. Peer to Peer and OTC trading are other routes to keep trading in INR after that.

For spot exchanges, the alternative becomes stable coins. If the international market rate of Bitcoin is $6600, traders in India should be able to buy one BTC for 6600 USDT/TUSD/DAI. Ofcourse the open orderbook exchange prices are set by traders so we might see the price fluctuating slightly.

USDT or TUSD pairs on Exchanges

So far, Bitbns, Coindelta and Koinex have showed an intent to launch stable coin trading pairs. It means that the traders will soon see all crypto assets on these exchanges paired with USDT or TUSD. But to trade with stable coins, you need to have these stable coins in your wallet. How can you get it?

Acquiring TUSD or USDT

Coindelta, Koinex and WazirX have announced their own Peer to Peer exchanges. These P2P exchanges will allow users to buy or sell stable coins for INR by directly trading with other traders. This is what it will look like

  1. Buy USDT/TUSD on P2P exchange by paying in INR.
  2. Buy Cryptocurrency using USDT/TUSD on Exchanges.
  3. Sell Crypto when the prices go high for USDT/TUSD
  4. Sell TUSD/USDT on P2P exchanges and get INR in your bank.

Alternatively, you can buy stable coins in exchange for your holdings on multiple international exchanges like Binance, Bittrex, Kucoin and so on.

Stability in Pricing over Crypto to Crypto trading

The biggest exchanges in the world offer Crypto to crypto trading pairs. You can buy any crypto using Bitcoin or Ethereum, or some other currency like Neo. The problem with such trading is that you’re always doubling your risk.

For example, if you buy XRP today. The Current price of XRP in USD is $0.47 and the price in BTC is 0.00007150.

If you buy 1000 XRP at 0.00007150 BTC price today, you pay 0.0715 BTC.

  • Tomorrow BTC prices in USD go up, but XRP prices in USD do not, hence the XRP is now equal to 0.00006250. That means your current investment of 0.0715 BTC now values at 0.06250 BTC only
  • If BTC prices in USD go down, but XRP prices in USD do not and XRP now equals 0.00008350 BTC, your current investment of 0.0715 BTC now values at 0.08350 BTC.

In both cases, the fiat value of XRP hasn’t changed but you still feel the burn of loss or joy of profit when trading with another cryptocurrency. When you can trade XRP with fiat or stable coin, you have to only worry about XRP’s price against fiat.

There are arguments that favour both sides. It all depends on you, how you prefer to see your investment, in BTC/ETH or in fiat.

Should you convert your holdings to USDT/TUSD?

If you are holding cryptocurrency and not planning to withdraw it to INR, the question is important. Should you sell it for stable coin or keep holding it? The answer is also the answer to the question “What would you do if you had the option to trade in INR?”

If you want to sell as you anticipate a market downfall, you can sell it for USDT/TUSD and wait for the market to fall and rebuy it when it does. TUSD or USDT do not bring any more value than fiat would bring to you.

You can treat stable coins like fiat, but in India, there is a forex angle attached to it. We will get there in a minute.

Difference Between USDT, TUSD and DAI Stable Coins

Both USDT and TUSD have put claims to be backed by actual USD on a 1-to-1 ratio. However, USDT or tether has been subject to much criticism as no formal audit has even been performed on its fiat reserves. Several critics have claimed that the irregular distribution of more USDT is what is inflating the prices of Cryptocurrencies. On other hand TUSD, TrueUSD is fully audited and has a transparent escrow account.

DAI and another stable coin BASIS use algorithmic approach to achieve stability in value to a USD. There is no backing of actual fiat currency. DAI is an ERC20 token so it can freely move around on the Ethereum blockchain. There are many other stable coins but USDT is the most popular one so far.

The Forex angle for India

The problem with transitioning from INR to USD is that there is a Forex angle associated with it. Rupee is the lowest performing currency in Asia. It went down to an all time low against the USD last month when 1 USD was equal to over 69 INR.

If you buy or sell USDT/TUSD/DAI, be sure to be vigilant about the market rates. These coins will always be equal to a $.

Arbitraging TUSD/USDT

Yes, stable coins are equal to Dollars. But, other cryptocurrency prices can impact the pricing of stable coins on an exchange as well. If the values of all cryptocurrencies on exchanges are not co-relating, the gap can be taken advantage of by arbitrators. Eventually it stabilises.

For example Bitcoin is currently $6600 internationally. 1 USD is 68.75 INR. That means 1 BTC = 453750 INR.

  • On Koinex BTC is trading at INR 437000. That means it is about 5% less in price. Hence, the TUSD value should also be 5% less than USD to INR value so that BTC = 6600 TUSD.
  • On Zebpay BTC is trading at INR 500000. That means it is about 10% more in price. Hence, the TUSD value on Zebpay should be 10% more than USD to INR so that BTC = 6600 TUSD

At the end of the day, the entire goal of stable currency based trading is to give you the feeling of trading with fiat currency. For Indian traders, the additional level of hinderance is the USD to INR conversion. Perhaps a Rupee based stable coin can solve that problem in future.

What do you think about stable coins? We want to know. Let us know in the comments below



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