A new era for crypto investors

By: Andrew Ludwig, Co-founder and CEO of Currency Hub

In a landmark move for South African investors, the Financial Sector Conduct Authority (FSCA) officially brought crypto assets under its regulatory framework in December 2023. This shift is crucial not only for financial advisers and professionals but also signals a new level of security and transparency for retail investors. The recognition of cryptocurrencies as legitimate financial instruments reflects a growing global trend in the financial markets, where digital assets are gaining credibility, especially following initiatives like BlackRock’s recent Bitcoin ETF.

For South Africans, this development mirrors the FSCA’s regulation of hedge funds in 2015, which successfully transformed hedge funds from an exclusive, opaque asset class into one widely understood and accessible. I have seen this evolution firsthand, having been deeply involved in the hedge fund industry, and now applying that same expertise to the burgeoning crypto market.

The importance of FSCA regulation

With FSCA regulation, crypto assets in South Africa are now seen as a more stable and reliable investment class. This offers crucial protection for investors, ensuring higher transparency, security, and accountability for crypto service providers, while reducing the risks of what was once a highly speculative market.

Crypto Asset Service Provider (CASP) licences now require businesses to meet strict regulatory standards, marking a pivotal moment for the industry. This regulation fosters responsible growth, integrating digital assets into the broader financial market.

For investors, FSCA’s move adds legitimacy to crypto, making it a viable part of diversified portfolios, similar to the maturity seen in hedge funds after regulation.

Understanding the new crypto landscape

The regulatory framework places new responsibilities on financial professionals. Advisers must now understand how cryptocurrencies fit into broader investment strategies, as digital assets are a rapidly evolving part of finance. The question is no longer if crypto belongs in a portfolio, but how it fits.

Opportunities in crypto range from traditional buy-and-hold strategies to more advanced approaches like crypto arbitrage, which requires a deeper understanding of the asset class and markets involved. Financial professionals who stay informed about regulations and these opportunities will be better positioned to guide their clients effectively.

A secure entry point into digital assets

One of the safest ways for investors to gain exposure to cryptocurrencies without the direct risks of price volatility is through crypto arbitrage. This strategy profits from price differences between markets, allowing investors to benefit without directly holding digital assets.

For South African investors, Currency Hub is the top arbitrage provider in terms of volume and profits. Entering the market in 2017 and becoming the most regulated in 2018, Currency Hub has consistently delivered strong returns. Though market premiums have decreased to 1.5%-3% from earlier highs of 30%, the strategy remains highly profitable. Clients can potentially earn over R100 000 within a few months, depending on the capital invested.

Why Currency Hub is leading the market

Several factors distinguish Currency Hub in the crypto-arbitrage space. Firstly, all associated companies are FSCA regulated (FSP 50850) and authorised CASPs, ensuring compliance with stringent regulatory requirements. This regulation covers all aspects of arbitrage, from strategic forex booking to precise timing of purchases.

Currency Hub also operates through a SARB-approved forex intermediary, enabling clients to fully utilise their R11m annual foreign investment allowance. Clients benefit from Currency Hub’s handling of all aspects of the process, including account setup, liaising with SARS for AIT applications, and booking forex. With the entire process managed online, it’s efficient and removes the administrative burden from clients.

A proven track record of success

Currency Hub’s results speak for themselves. Over the past seven years, the company has conducted more than 250 000 trades, totalling over R25bn in value. They have achieved this without a single loss, due to their comprehensive hedging strategies that mitigate exposure to foreign exchange and crypto fluctuations. By securing fixed rates for each trade, Currency Hub generates client profits regardless of day-to-day volatility in the rand/dollar exchange rate or changes in the price of Bitcoin.

This hedging solution is key to the success of their arbitrage strategy and, importantly, they trade every day, while most other providers only trade twice per week. Clients are never exposed to the risk of Bitcoin price drops or sharp changes in the forex market, providing peace of mind that their profits are stable and predictable.

Simplifying arbitrage for clients

Another area where Currency Hub excels is in simplifying the arbitrage process. Investors interact only with Currency Hub, rather than needing to coordinate with multiple service providers. In-house accountants streamline the AIT application process, optimising approval timelines and reducing potential delays.

Currency Hub has also built relationships with authorised dealers, such as Capitec, for foreign exchange processing, which further reduces counterparty risk. The company works with institutional-grade OTC desks and exchanges to secure stablecoins, minimising exposure to cryptocurrency price volatility. Clients can rest assured that their investments are handled with the highest levels of security and transparency.

A viable opportunity for financial advisers and retail investors

For financial advisers, Currency Hub presents an excellent opportunity to introduce clients to the world of digital assets in a secure and regulated manner. Crypto arbitrage, underpinned by FSCA oversight, is a relatively low-risk strategy that offers strong returns while minimising exposure to the price volatility often associated with crypto investments.

As the regulatory environment around crypto assets continues to evolve in South Africa, financial advisers who understand the potential of crypto arbitrage will be well-positioned to guide their clients towards new opportunities that add diversification and growth to their portfolios.

Crypto arbitrage is one of the safest and most effective ways to engage with the digital asset space. With FSCA regulation in place, platforms like Currency Hub offer a highly regulated, efficient, and profitable solution for South African investors. To learn more, visit https://www.currencyhub.co.za and explore the benefits of this proven strategy.