Future Forex – Crypto Arbitrage FAQ (2024)

Arbitrage is possible when an asset has a price mismatch between two different markets. One can take advantage of an arbitrage opportunity by buying the asset at the cheaper price and selling it at the higher price on the other market.

Future Forex have identified that certain crypto assets, e.g. Bitcoin, sell at a higher price (typically 2-5%) in South Africa compared to overseas.

This price difference allows us to buy crypto assets abroad and sell them in South Africa at a profit. We facilitate the process from start to finish, so that our clients can effortlessly share in this high-yield opportunity.

This is explained in the following video:

Under current market conditions, clients can expect to earn a maximum of ~R250,000 per calendar year. Your profit is largely dependent on a couple of factors, namely: the amount invested per cycle and the amount of annual Foreign Exchange Allowance utilised (see the “What is a Foreign Exchange Allowance?” FAQ).

The table below shows the expected net profit per trade after all fees for different investment amounts and market conditions (“Average Spread”)

*Expected net profit per trade after all fees.

It’s important to understand that due to the cyclical nature of the arbitrage process, clients can trade multiple times per calendar year until they use up their Foreign Exchange Allowance (maximum of R11 million per calendar year). The table below shows expected annual profits assuming a client makes full use of their annual Foreign Exchange Allowance:

*Potential net profit assuming full use of Foreign Exchange Allowances.

Future Forex will assist you in utilising as much of your Foreign Exchange Allowance as you are comfortable with. This ensures that you maximise your returns each calendar year.

We make it possible for you to invest in Crypto Arbitrage effortlessly and safely while maximising returns.

We have a transparent and client-centric approach. We achieve this through open communication, zero hidden costs and by providing detailed statements highlighting your return and the costs involved at the completion of each trading cycle. Your dedicated Relationship Manager will guide you through this making it as smooth and easy for you as possible, while ensuring you get the most out of your investment.

Our goals are completely aligned with yours. Rather than implementing a typical management fee structure irrespective of performance, we have applied a performance fee structure such that our fees are entirely correlated with the profits of our clients. This zero management fee approach demonstrates our team’s confidence in our ability to make exceptional returns for you and ensures that our interests are fully aligned with yours.

Arbitrage opportunities typically come about as a result of supply or demand limitations in a market. In the case of Crypto Arbitrage, this is a result of capital controls which limit the supply of crypto assets to South Africa.

Capital controls are government measures taken to limit the flow of financial assets across a country’s borders. In South Africa, this takes the form of annual Foreign Exchange Allowances (see “What is a Foreign Exchange Allowance” FAQ) which limit the amount of funds you can send abroad each year. This effectively increases demand in South Africa for crypto assets, such as Bitcoin, that offer global exposure without making use of these allowances, while also restricting their supply to South Africa. This results in crypto assets selling locally at an average premium of 2-5% compared to overseas markets.

Fortunately, your Foreign Exchange Allowance can be used to purchase crypto assets abroad, whereas companies and other non-natural entities are not allowed to do so. This means only South African individuals/residents are able to capitalise on this exceptionally lucrative arbitrage opportunity which is why it has existed for over 5 years.

Typically, arbitrage opportunities do not last longer than a couple of minutes as limitations are quickly corrected by market mechanics. However, the South African Crypto Arbitrage opportunity is a result of structural limitations, namely capital controls, which cannot be corrected by normal market mechanics. Therefore, this arbitrage opportunity is likely to exist as long as South African capital controls limit the purchasing of crypto assets abroad.

Our minimum investment is R100,000, however the more you invest the better your returns will be. This is due to fixed costs and our performance share decreasing as a percentage of the total amount invested. To find out more about how the investment amount affects returns, see How much can I expect to make?

Note that your investment amount can be increased or decreased at any stage of the investment.

Only South African residents over the age of 18 can invest in Crypto Arbitrage. In short, you’ll need to either be considered ordinarily resident in terms of South African common law or meet the “physical presence test”.

Additionally, we require a minimum investment of R100,000. This is a result of various fixed costs involved in the process (primarily the bank charges associated with sending funds abroad) which significantly reduce profits on smaller investment amounts making them less feasible.

Ideally, the invested funds should be your own. You can however loan funds from a bank or use donated funds from a spouse to invest in Crypto Arbitrage.

Most importantly, you cannot loan funds from friends or family if they are sharing in the risk and profits as they are then effectively making use of your Single Discretionary or Foreign Capital Allowance. This contravenes exchange control regulations and is therefore considered an illegal activity. You can find out more on the SARBs FAQ under the Crypto assets header.

We take a conservative approach and do not allow clients to invest funds borrowed from friends or family (except spouses) with us, regardless of whether the lender is sharing in the risk and profits.

We make investing in Crypto Arbitrage hassle-free. The entire process is as follows:

• The first step is to register an account with us.
• From this point on, you’ll have a dedicated Relationship Manager who will guide you throughout the process to ensure you maximise your returns and to streamline the experience.
• Next, you’ll provide us with your FICA documents (ID, Proof of Address and Source of Funds) which will be used to open a Foreign Exchange account with Capitec Business bank (a division of Capitec).
• Once your account has been opened, you’ll EFT your investment to your Foreign Exchange account so that we can get started with your first trading cycle.

Once these steps are done, we’ll begin trading your funds. At the end of each trading cycle you’ll receive a statement detailing your returns and investment history so that you can keep track of your investment’s progress.

After you’ve completed your first few trading cycles your Relationship Manager will provide guidance on how to maximise your investment by making the most of your Foreign Exchange Allowance (see “What is a Foreign Exchange Allowance” FAQ). If you wish to withdraw or increase your investment while trading, you can do so at any point without any notice period.

At present we primarily trade Bitcoin and USDC (a crypto asset pegged to the US Dollar) as these offer the highest returns with the lowest risk when compared to other crypto arbitrage opportunities. The primary reason for this is that other, less popular, crypto assets are traded at much smaller volumes. This results in them trading at a lower average premium, while also being less liquid and thus more difficult to trade at large volumes.

We do however continuously monitor other crypto assets and arbitrage these when they offer a higher return and sufficient volume.

Our in-house systems consider your specific circ*mstances as well as the time left in the year to estimate the optimal market conditions for you to trade.

We do this by calculating how often you need to trade to finish your allowance (or use as much of it as possible) before the end of the year. This is based on your investment amount, AIT (Approval of International Transfer) application size, and considers spouses if they are trading the same funds.

Our proprietary Returns Optimiser algorithm uses this data to compute the optimal minimum spread required for each of your trades. We know all the costs involved in a trade, so we translate this spread to a “Minimum Return” for each of your trades. As this is a minimum, you will typically earn more than this on each trade. The Minimum Return can be viewed on your dashboard whenever you have a trade loaded.

Example:
A client with a larger investment amount and larger AIT applications needs to trade less frequently than a client with a smaller investment amount and application size. This means the Minimum Return per trade will typically need to be set lower for a client with a smaller investment amount.

Why this works?
Our Returns Optimiser allows you to enjoy an Arbitrage trading experience that is optimised for you. As our fee structure is linked to the performance of your investment, we will always strive to maximise your returns over the calendar year.

Arbitrage is a well known low-risk trading strategy. Unlike a typical investment, arbitrage does not predict the price movement of an asset but rather capitalises on the price differences of an asset between different markets. Typically there are market risks associated with holding the asset for a period of time between buying and selling it, however, Future Forex uses a fully hedged trading system which ensures clients are not exposed to these market risks.

This fully hedged system is achieved by locking in the sell rate of the crypto asset at the same instant that it is bought. This allows Future Forex to reliably predict a client’s return on their trade at the instant it is being executed. As a result of this feature, clients are able to set a minimum targeted return, and Future Forex will only initiate a trade if this target will be met or exceeded.

Typically there are market risks associated with Crypto Arbitrage due to funds being exposed to both forex and crypto asset price fluctuations. These risks can be substantial on a per trade basis, which is why Future Forex has developed and implemented a fully hedged trading system. This trading system ensures clients are never exposed to these market risks and can generate consistent returns.

Several third-parties will have custody of your funds at different stages of the process. In the unlikely event that a third party experiences a security breach, your funds may be at risk. This risk is mitigated by using hand-picked third-parties who have a proven track record of reliability and excellence.

Nonetheless, we have taken a prudent approach in that we limit exposure where possible by tranching the transfer of funds so that only a portion are in the custody of certain third-parties at a time. Furthermore, each trading cycle is typically completed within 24 hours, as we aim to minimize the time your funds are in the custody of third-parties.

Our all-inclusive fee works on a performance fee model rather than a flat management fee. This means that our fee is directly proportional to how well your investment performs. In short, our fee structure ensures that our interests are completely aligned with yours in aiming to maximise your returns.

We offer a tiered fee structure where lower fees are charged for larger investment amounts. This is shown in detail in the table below:

Note: We do not charge any hidden or additional fees and there is no cost to register with us. Our AIT application service is complimentary and is facilitated by our highly skilled and experienced partner tax practitioners.

Our performance fee structure is all inclusive. Future Forex will not charge additional fees for anything throughout the process. This means that there are no management, registration or FIA application fees.

As part of the trading process we make use of various third parties who charge their own processing fees. These fees are deducted before your profits are calculated, and we therefore share in these transaction costs. As a result, we have set out to minimise these costs while also ensuring our third-parties are reliable and secure.

Every calendar year, each South African resident is granted a R1 million SDA (Single Discretionary Allowance) and R10 million AIT (Approved International Transfer) to send funds offshore. These two allowances combined form your Foreign Exchange Allowance which, in total, enables you to send up to R11 million abroad in a calendar year. These allowances are reset on 1 January each year, irrespective of how much was utilised in the previous year.

When investing in Crypto Arbitrage, a portion of your Foreign Exchange Allowance is used each time your funds are sent abroad to purchase crypto assets overseas. This caps the total value that each individual can invest in Crypto Arbitrage each year, effectively limiting the profit that can be made annually (~R250,000 profit). While this is not ideal, the Foreign Exchange Allowance is the very reason this arbitrage opportunity exists in the first place (see “Why does this arbitrage opportunity exist and how long will it last?” FAQ).

Your R1 million SDA can be readily used without any additional paperwork. In addition to utilising your SDA, our tax practitioners are able to (at no extra cost) assist with unlocking your R10 million AIT. This requires an application to SARS which your Relationship Manager and our tax practitioners will facilitate so that your entire experience is hassle-free.

Earnings from Crypto Arbitrage trading fall under Income Tax. These earnings should therefore be disclosed in your annual income tax returns and filed as part of your provisional tax returns. We’ll provide you with an investment summary statement for this very purpose.

Should you need assistance with filing provisional tax returns, our tax team will be happy to assist.

Yes, we have the following licenses/approvals:

• Financial Services Provider (FSP) and Crypto Asset Service Provider (CASP) – authorised by the Financial Services Conduct Authority (FSP 51884)
• Foreign Exchange intermediary – approved by the South African Reserve Bank
• Primary accountable institution – regulated by the Financial Intelligence Centre

Future Forex will only contact you via the following channels:

• Emails from “…@futureforex.co.za” and “…@future-forex.co.za”.
• A call or WhatsApp from your dedicated Relationship Manager. You can verify your Relationship Manager’s contact details by logging onto your Future Forex account.
• A call from our general landline numbers (021 518 0558 or 021 518 0559).

If you get approached by someone purporting to be a Future Forex representative, you can verify this either by emailing [email protected], or by contacting your Relationship Manager via the contact details provided in your Future Forex account.

NB: Do not provide any personal information, login credentials or send funds to someone claiming to be a Future Forex representative until you have verified this.