Those involved in crypto arbitrage will have noticed that premiums have jumped 100% in recent months, the result of lower volumes caused by third-party payment company Circle's decision to stop accepting payments for transactions. arbitration.
CURRENCY HUB was unaffected as it did not rely on Circle to convert rands into crypto – a crucial step in arbitrage trading. Circle is the issuer of USDC, a US dollar-backed stablecoin that most providers use for arbitrage trading.
The strangulation of arbitration services in South Africa following Circle's exit from that market is why the arbitrage premium has rebounded.
Crypto arbitrage involves buying cryptos overseas and selling them in South Africa, where they traditionally trade at a premium due to exchange controls.
This week, CURRENCY HUB announced a major expansion of its operations by taking over arbitrage trading services for all clients from Koinexpert, another arbitrage service provider.
Koinexpert explains that all cryptocurrency businesses will need to be licensed as Financial Service Providers (FSPs) from December 2023. This is a onerous requirement that will force many providers to shut down unless they only partner with already licensed partners such as CURRENCY HUB, which has a discretionary asset management license from the Financial Sector Conduct Authority (FSCA Category 1&11 - FSP 50850) as well as a forex intermediary license approved by the South African Reserve Bank.
"In March, most of our competitors were forced to suspend their transactions when Circle's third-party payment gateway was disabled," says Andrew Ludwig, co-founder of CURRENCY HUB.
“This meant that anyone trading on the stock exchange was forced to stop as converting fiat rand to crypto was no longer possible, so the arbitrage cycle could not be completed.
"You couldn't offer arbitrage anymore unless you had a fiat-crypto onramp alternative. Fortunately, that didn't affect us.
South Africans can participate in crypto arbitrage using their special investment allowance of R1 million per year, and for those with tax clearance, their foreign investment allowance of R10 million per year. The minimum capital requirement varies between R100,000 and R200,000.
“We are delighted to announce that in the future, CURRENCY HUB, a regulated FSP, with over six years experience in lossless crypto arbitrage, will support all arbitrage exchanges for clients of Koinexpert," says Ardi Coetzee of Koinexpert.
CURRENCY HUB launched crypto-arbitrage trading in 2017 and outlasted several competitors who were forced to shut down their operations, largely due to regulatory uncertainty.
“We have long understood the need for regulation, which is why we obtained all the required FSP licenses, even before it became a requirement,” says Ludwig.
What does the deal with Koinexpert mean for crypto arbitrage and bounty?
With fewer crypto arbitrage service providers, the premium has risen to around 2.5% when trading via crypto exchanges (inaccessible to most) and around 1.5% in OTC markets (OTC).
This is a 100% jump from a few months ago, and still remains in an attractive premium band, allowing CURRENCY HUB to continue trading.
Realistically, participants can expect to earn around 1% on a trade after fees, which equates to around R110,000 of the R11 million allowed per year under exchange controls (although historical performance do not guarantee future performance).
This is a fully automated service, with all trades covered.
“It is important to note that premiums of around 2.6% quoted on the exchange are largely inaccessible due to a lack of suitable payment gateways and the appetite of offshore banks to settle. primarily through OTC market providers able to offload trading volumes from CURRENCY HUB, while reducing counterparty risk,” adds Ludwig.
Premiums quoted by CURRENCY HUB are currently around 1.6%, before fees. Ludwig says: “At these levels we can generate between R60,000 and R120,000 for each client in a few months because they can trade every day, sometimes three times a day. Clients using the credit facilities available through CURRENCY HUB have recently generated between over R100,000 and R120,000 in six to 12 weeks.
“Over the years, CURRENCY HUB has managed a number of affiliate relationships with companies offering cryptocurrency arbitrage to their respective communities. This particular transaction with Koinexpert is one of many, but [is] our largest yet, paving the way for other cryptocurrency arbitrage firms to exit with real value while ensuring their clients receive the best possible service,” says David Farelo, Co-Founder of CURRENCY HUB .
For more information, please visit the CURRENCY HUB website.
Brought to you by CURRENCY HUB.
Moneyweb does not endorse any product or service advertised in sponsored articles on our platform.