Can USDT be priced differently across the globe? "YES"
It's never been clear how Tether is supported, or even whether it is backed at all. For years, a vocal group of detractors has claimed that, despite the company's assertions, Tether Holdings has the assets to sustain the 1-to-1 exchange rate, effectively making its coin a fake. Tether, on the other hand, looked to be simply another curiosity in the crypto world, where joke currencies with photos of dogs may be worth billions of dollars and scammers make millions with ridiculous-sounding schemes on a regular basis.
Tether (USDT) is a stablecoin with a stated value of one US dollar per USDT. Tether Limited, USDT's centralized authority, has the power to manufacture tether and hence claims to be able to produce something comparable to US dollars. Other than the British Virgin Islands, Tether is not a central bank, bank, or regulated in any manner. It has not been audited, has been punished by financial regulators for financial malfeasance, and has admitted that its stablecoin is not backed by the US dollar in the majority of cases. However, there are instances when just a few exchangers provide rates that are greater or lower than the dollar equivalent.
This has both advantages and disadvantages for cryptocurrency investors. Let's assume the value of one dollar in India is 74 rupees, but one tether costs 80 rupees or around 1.1 dollars. On the other side, if the value of the dollar rises and the value of tether, a stable coin, declines, investors can benefit handsomely by purchasing a "dollar-backed currency" at a cheaper rate. This presents a critical question, Is it acceptable to price a dollar-pegged currency differently?
Why does Tether's price fluctuate around one dollar?
- Supply and demand: When the price of crypto currencies falls, many individuals desire to sell their cryptos for tethers. If there aren't enough liquid tethers on the market, the price may rise. Similarly, if bitcoin is surging, many individuals may want to sell their tethers all at once, causing their value to plummet.
- People trade tethers for dollars because they can do things dollars can't do, being easily transferred. Depending on how important it is to be able to easily transfer money, the price of tether is pushed up.
What is next?
Tether's market influence is unlikely to last in the long run, as countries establish central bank digital currencies and move to regulate them. Regulation, on the other hand, moves slowly, and it's difficult to predict when such changes will occur. If legislation is implemented in the United States to restrict tether exposure, it might have ramifications for the crypto sector if exchanges utilize it to manipulate prices. Tether printing and bitcoin price swings were shown to be connected based on past price movements.
Tax Implications
Will investors have to pay tax if they purchase USDT in the US = 74 rupees then sell it on an Indian exchange to encash into their Indian banks?
Yes! Let us not forget that tether is a digital asset, not a real dollar. The difference in value appears to be a capital gain transaction, which can be taxed accordingly.
