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Sars puts a crimp in crypto arbitrage

By requiring approval for each trade in terms of the foreign investment allowance.
The change means crypto arbitrage trades can no longer be conducted on a daily basis. Image: AdobeStock

The South African Revenue Service (Sars) has made it more difficult for taxpayers to get approval on crypto arbitrage trades using their R10 million a year foreign investment allowance (FIA).

Crypto arbitrage has become a popular way for South Africans to profit from differences in the prices of crypto assets on local and overseas exchanges. That price difference has ranged from about zero to 3% in recent months.

To participate, South Africans are required to purchase crypto assets such as bitcoin on overseas exchanges using either their special discretionary allowance (SDA) of R1 million a year, or their FIA of R10 million a year. They then purchase cryptos abroad and ship them to SA for sale at a higher price.

No permissions are required for the SDA, but South Africans making use of their R10 million FIA require tax clearance from Sars.

Delays

Most crypto arbitrage trades are in lots of R100 000 or R200 000, requiring multiple approvals from Sars.

Until recently, those approvals could be obtained by going online and hitting a PIN ‘refresh’ button on the Sars website once the initial FIA approval had been granted. Sars would issue a new PIN each time an approval was sought.

However, Sars recently updated its eFiling system, so that each time the ‘Refresh’ button is hit, the PIN remains unchanged.

In a message sent to clients this week, crypto exchange VALR says this means local banks now have no way of telling the difference between old and refreshed PINs that are “generated to send the same capital originally applied for in an FIA application to an international beneficiary”.

It adds: “The implication of this is that refreshed FIA pins will not be accepted as valid PINs for the purposes of arbitrage trading and an entirely new FIA application will need to be made in order to conduct further arbitrage trading under FIA once the original FIA pin is exhausted.”

VALR CEO Farzam Ehsani says this means crypto arbitrage trades can no longer be conducted on a daily basis, as was the case in the past.

Clients must wait for each FIA application to be approved before trading.

The main cost to clients is the extra time in waiting for these approvals.

‘Opportunity not diminished’

Jon Ovadia, CEO of cryptocurrency prime broker Ovex, says the change to the Sars eFiling system adds time delays, but does not diminish the crypto arbitrage opportunity.

“We never used the automatic PIN renewal system as we know Sars did not like this system [even though it made it available to the public],” he says.

Ovex made FIA applications manually, without making use of the automatic application renewal system previously allowed. This meant its applications were paper-based and slower, and fewer trades could be done in a week.

Ovadia says the change to the eFiling system does little to impact its arbitrage operations, adding: “We’ve been working with Sars on a better system that they are happy with.”

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*I’m so shocked*

Also petrified and in awe of the awesome powers of the states most powerful looting ally !!!

They need to be shutdown …. no more free money for the ANC and the Government!

… Tax paying citizens need to have a say in how this money is being spent…. and not left to the Voters (looters)

You didn’t really think governments – who are addicted to extorting ever increasing taxes – would just stand by and allow their cash cows to escape?

”When you are down and out, something always turns up – and its usually the noses of your friends”

Orson Welles (1915-1985)

Billions have been lost, and sunny SA became the capital of ”Crypto-scamming”- this restriction came at the right time, and not a moment too soon!

Hi Jon/OVEX and Ciaran Ryan please provide facts to this claim as a TP and a clint and this is completely false.

“Jon Ovadia, CEO of cryptocurrency prime broker Ovex, says the change to the Sars eFiling system adds time delays, but does not diminish the crypto arbitrage opportunity.

“We never used the automatic PIN renewal system as we know Sars did not like this system [even though it made it available to the public],” he says.

Ovex made FIA applications manually, without making use of the automatic application renewal system previously allowed. This meant its applications were paper-based and slower, and fewer trades could be done in a week.

Ovadia says the change to the eFiling system does little to impact its arbitrage operations, adding: “We’ve been working with Sars on a better system that they are happy with.””

I still want to see a full life cycle analysis.

Had R1m, export it at the dollar buy rate which is invariably much more expensive than the midpoint. Now have at 14.7 ABSA $68,027

Buy whatever crypto at $1000 each so have 68 crypto.

Sell them in SA at $1030 (the 3% extra claimed arbitrage) now have $70k

Convert the $70k at ABSA 14.3 rate you have R1,001,000 not counting any other fees by the bank or the brokers.

The banks make 2.5% all day every day on every currency transaction. Yes I know not exact but ask yourself why the TT sell is 14.3 and TT buy is 14.7 when the bank very certainly does NOT close individual transactions as it aggregates and settles the net of their 10,000 buy and sell transactions. We get screwed properly.

Wednesday rant done

We need apps like Revolut and Wish that allow users to exchange currencies with each other, cutting out the banks. Revolut has just listed in London, valued at $30bn. These guys are solving your problem! Definitely worth looking into, not sure if one can use them from SA.

I wanted to start a ‘club’ whereby legit importers and exporters share that buy / sell margin by pooling their transactions. Hectic legal issues.

Those margins don’t exist elsewhere or among the big currencies. I’m not talking street bureau d change – talking large import / export.

to see how we get screwed look at the $/€ margin at Citibank or such. A tenth of the margins our wankers charge

I personally welcome this news. Its no different from the looting taking place.

End of comments.

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