Arbitrage of Stable Coin in South Africa

Stablecoin arbitrage involves using your Single Discretionary Allowance (SDA) and/or Foreign Investment Allowance (FIA) to take advantage of the bid premium on South African Crypto OTC desks.

The Set Up.

Approach a financial intermediary in South Africa. Ideally, these companies are an FSP (Financial Service Provider) and Authorised Dealer by the South African Reserve Bank (SARB). This allows them to participate in selling FX currency to move cross-border. They are preferred to banks as they offer lower FX spreads.

Secondly, set up an account on an OTC desk in South Africa. You could use various providers; choose one that best suits your flexibility. Build a relationship with them because you will be locking the equivalent dollar amount on their desk when you book at an intermediary.

How does it work?

You are an individual with a minimum of ZAR 200,000; you can deposit that money into an intermediary account and receive a quote from their dealing desk to lock in USD to be remitted. Let’s say the current spot is 18.60 USD/ZAR at the intermediary dealing desk, and the OTC bid rate is USDT/ZAR 18.95. You would equally lock one to buy USD and one to sell USDT.

The OTC desk will advise you on how to send the USD to their offshore USD Account; once received, you will incur a small fee to convert from USD to USDT, and your sell deal will be actioned to convert the USDT to ZAR. Thus harvesting a ~1% premium after fees.

If you have access to FIA, you have a total of R11 million to transact, thus bringing your total gain to R110,000 from R200,000. However, you only made 1% of R11 million.

Limitations

1. You must be a South African resident because of the access to your SDA and FIA.

2. You have R1 million to transact freely (SDA) before applying to South African Revenue Services (SARS) to access your investment allowance of R10 million.

3. Companies cannot participate in this because they do not have an allowance.