Indians Leverage Overseas Platforms to Convert USDT and Stablecoins into Gift Cards for Everyday Purchases
The use of cryptocurrencies in India is evolving, with reports highlighting a method where individuals are ’round tripping’ crypto to make everyday purchases. This process allows users to convert their digital assets into gift cards or vouchers, enabling transactions without involving local banks or attracting the attention of tax authorities. The mechanism has raised concerns among regulators and government agencies regarding its implications for financial oversight.
How the Crypto Re-routing Works
According to a report by ET, the process involves various fintech and e-commerce platforms based in Sweden, Germany, and Singapore. Users transfer stablecoins from their private wallets to these overseas platforms, which then procure gift cards in bulk from Indian voucher issuers. These vouchers, classified as closed-loop prepaid instruments, can be used for purchases at designated brands and stores. Since they cannot be converted to cash or used for third-party payments, they fall outside the purview of Reserve Bank of India (RBI) regulations.
The overseas platforms either maintain an inventory of digital card codes or generate them through arrangements with Indian partners. The crypto received from Indian users is sold abroad, and the proceeds are used to pay the Indian voucher partners. This round-tripping mechanism was recently highlighted to the finance and home ministries by a blockchain research organization advising law enforcement. Sudhakar Lakshmanaraja, founder of Digital South Trust, noted that these pathways warrant further scrutiny due to their scale and cross-border nature.
Deep Dive
Users aiming to avoid leaving a transaction trail typically do not withdraw crypto from Indian exchanges. Instead, they transfer coins directly from private wallets to foreign platforms via blockchain pathways. These platforms profit from the conversion rates applied when converting crypto into vouchers. One platform reportedly issued over 16 million cards to Indian users, offering a conversion rate of 88 for one USDT, compared to a higher rate of over 95 in India.
The use of cryptocurrencies for purchases raises questions about India’s regulatory framework for cross-border payments. Moin Ladha, a partner at Khaitan & Co., emphasized the need for clarity regarding crypto transfers, particularly when converted into vouchers that provide purchasing power in India. Additionally, industry officials warn that gift cards could be misused to circumvent existing laws, as the codes can be transferred between individuals.
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