Crypto arbitrage is booming in South Africa (SA) – defying earlier predictions that it would fizzle out as the opportunity became widely known. Instead, it continues to deliver market-beating returns with remarkably low risk.
Authorised Financial Services Provider (FSP) Future Forex, which recently walked away with the Company of the Year award at the Africa Career Summit, is a leading provider of crypto arbitrage in SA.
Crypto arbitrage involves buying crypto assets abroad using an individual’s foreign exchange allowance, and then selling them at a higher price on South African exchanges. Due to local exchange controls, the scarcity of foreign exchange means that crypto assets typically sell at a 2-3% premium in SA relative to offshore exchanges. Future Forex capitalises on this price difference to generate a profit for its clients.
“What’s astonishing is that crypto arbitrage has become more popular than ever,” says qualified actuary and CEO of Future Forex, Harry Scherzer.
“For years we’ve been asked whether crypto arbitrage would still be an investment option for South Africans, and our answer was always the same: so long as SA has exchange controls in place, South Africans will pay a premium for crypto assets, and this makes crypto arbitrage as viable as ever.
“One thing that has changed in the last year is the increasing participation of wealth managers and financial advisors who understand how the trade works, the potential returns and the ability to leverage this opportunity on behalf of their clients,” adds Scherzer.
Another crucial change in the industry was the introduction of licensing by the Financial Sector Conduct Authority (FSCA) last year, and Future Forex was among the first in SA to be awarded its Crypto Asset Service Provider (Casp) licence. “We’ve long pushed for regulation,” Scherzer says. “It’s weeding out bad actors and ensuring compliance, which benefits the market.”
The chart below shows the USD/ZAR exchange rate (in purple) tracked against the crypto arbitrage premium (in blue) over the past 12 months. It’s clear that there’s a strong inverse correlation between the exchange rate and the arbitrage spread, which typically rises when the rand strengthens.
Source: Future Forex
Exchange controls mean that South Africans have access to R11 million a year to trade. There is their annual R1 million Single Discretionary Allowance and an additional R10 million in the form of an Approval of International Transfer (AIT). The South African Revenue Service (Sars) requires approval for the AIT, which Future Forex handles on behalf of its clients at no extra cost.
Low-risk trading
Crypto arbitrage is popular due to its low-risk nature. Unlike direct investments in bitcoin (BTC) or other crypto assets, it doesn’t rely on predicting asset price movements. Instead, the aim is to buy assets like BTC or a USD-backed stablecoins (like USDC) on overseas exchanges and then sell them in SA at a profit.
The main risks involved are changes in crypto prices or ZAR/USD exchange rates while a trade is underway – but Future Forex mitigates this by fully hedging its trades. This means profits are locked in at the moment a trade is executed, ensuring clients aren’t exposed to any market risks.
That leaves third-party risks, such as the potential failure of a third party used to complete the trade (such as a bank or a crypto exchange), but Future Forex manages this by selecting the most reputable providers following rigorous due diligence.
Future Forex has processed more than R50 billion in over 183 000 trades and has never made a single loss.
Investment comparison
The chart below compares investment returns from crypto arbitrage, the JSE All Share index, the S&P 500, and an 8% annual interest account. Crypto arbitrage consistently delivered superior returns, growing an initial R200 000 investment to R296 846 over just 12 months.
Source: Future Forex
Dedicated relationship managers
Future Forex pairs each client with a dedicated relationship manager to guide them through the entire process, and to assist with any questions about arbitrage trading or tax.
“We also have a dedicated partnerships team for financial advisors and wealth managers looking to invest on behalf of their clients,” says Scherzer.
Along with this, clients have access to an online dashboard via the Future Forex web and mobile app for a real-time view of the progress on each trade, as well as the balance in the account.
Source: Future Forex
Statements are emailed to clients (or their advisors) after each trade, detailing the spread (gross profit), third party fees, Future Forex fees, net profit, and balance.
Who qualifies?
The minimum investment amount is R100 000, although R200 000 or more results in higher returns. This is because certain fixed costs (like SWIFT fees) decrease as a percentage of the total amount invested.
Costs
Future Forex operates on a 25-35% profit-sharing model based on the investment amount, with no other hidden fees or costs. “This ensures our interests perfectly align with our clients’ – if they don’t profit, neither do we,” Scherzer says.
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