What was once a thriving cottage industry in SA has shrivelled into irrelevance. What happened? From Moneyweb.
Thousands of South Africans made a decent income over the years from crypto arbitrage – buying crypto assets abroad and selling them at a higher price in SA.
In 2017, you could buy bitcoin (BTC) on an overseas exchange like Kraken and sell it an hour later on Luno and pocket an 8.65% profit. Then repeat the process so long as your R1 million a year Special Discretionary Allowance (SDA) lasted, before tapping into your R10 million a year Foreign Investment Allowance (for which you need South African Revenue Service tax clearance).
It was easy money back then, until word got around and thousands of people jumped on the arbitrage train.
As the table below shows, those days appear to be behind us.
By 2023, the arbitrage spread had narrowed to 2% and is now down to 1%, before costs. There are momentary bumps in the spread, but the trend is towards zero.
What was once a thriving cottage industry quickly became corporatised, as several firms offered to do the legwork for a share of the profits. Even that is closing down. One of these companies, Shiftly, closed its arbitrage service in October 2025.
Earlier this week, the Johannesburg High Court dismissed an urgent application by Cape Town-based Kastelo to set aside a blocking order on its Access Bank account.
That blocking order had been imposed by the South African Reserve Bank (Sarb) after receiving reports from Access Bank and whistleblowers that Kastelo appeared to be in contravention of exchange control regulations.
One of the complaints against Kastelo was that it was effectively renting SDAs at between R2 000 and R10 000 a year, often from people who did not have sufficient funds to conduct arbitrage themselves.
In such cases, it provided loans to qualified applicants.
It is the lending of money to engage in arbitrage that appears to have triggered Sarb’s response.
Moneyweb contacted Kastelo several months ago about these allegations and was told it had obtained legal advice that it was not in breach of exchange controls.
Where it lent money to those using its arbitrage services, this was done in accordance with the National Credit Act, with funds being extended only to those who qualify.
No more borrowing to conduct arbitrage – Sarb
It was common among crypto arbitrage companies to lend money before 2022, then Sarb stepped in to prohibit the use of cards to fund a foreign currency account. Kastelo maintains this does not apply to its business and the regulations do not prohibit loans.
This is what the Sarb circular to authorised dealers says:
“Residents should note that they may not fund their international trading accounts at registered brokers using South African credit, debit and virtual cards, but such trading accounts should be funded in terms of the single discretionary and/or foreign capital allowance …”
The circular goes on to say that authorised dealers must convert rands into foreign currency and transfer the funds via the banking system as an electronic funds transfer (EFT) to a foreign bank account, or deposit them in a foreign currency account at an authorised dealer.
In practice, crypto arbitrage investors found easy ways around this – once you had exhausted your R1 million SDA, you would then transfer the capital and profits to your wife, son or daughter and let them use their SDAs.
Merits of the case not yet heard
Kastelo’s legal advice was that it is doing nothing wrong.
The Joburg High Court threw out Kastelo’s urgent application to set aside the Sarb’s blocking order on its bank account, but it has not yet heard the merits of the case. That may now be set down on the ordinary roll.
“Our view is the court didn’t make any judgment on substance, and it was too complex to hear on an urgent basis,” says Kastelo CEO Nicholas Burke, adding that the company has always had a good relationship with the regulators and communicated with them frequently.
Burke says the company stopped its arbitrage service in December. Shiftly stopped its service in October 2025.
Still, what’s happening to the spread?
With two of the most prominent players out of the market, how does one account for the disappearing arbitrage spread?
Reduced volumes should lead to wider spreads. That hasn’t happened. Something more systemic appears to be at play.
“Crypto arbitrage spread is correlated to appetite for crypto generally, which has dropped significantly in the last few months,” says Carel de Jager, CEO of crypto analytics firm Silver Sixpence, which has visibility into crypto flows on exchanges and into and out of SA.
Listen/read: Why hasn’t bitcoin followed gold to the heavens?
We’ve written off crypto arbitrage before, and it’s bounced back, even if only sporadically. Why should the future be any different?
