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February 01, 2017, 12:23:02 PM |
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Fellow bitcoiners,
I'm an American, living abroad in a country where the cost per bitcoin at a local exchange is consistently around $40-$55 more than at American exchanges (and even more of a disparity on LocalBitcoins). Obviously there's a decent arbitrage opportunity here, especially if one has a local presence in the foreign country, can legally do business there, and has a local bank account in the foreign country.
The business model will be simple. From my American bank wire FIAT to American Exchange -> Buy btc at American exchange for cheaper -> Transfer btc to foreign exchange -> Sell btc on foreign exchange for a higher price -> Transfer FIAT from foreign exchange to foreign bank -> Wire money back to American bank. Rinse -> repeat cycle.
I'm assuming this is legal in both countries (because it is, these are big exchanges with large volume operating legally). And I'll be reporting all revenue/income to tax departments in both countries.
What are some of the challenges related to this? Where will I get stopped, questioned, prodded, or blocked somewhere along the chain? My main concern is: I'd be moving ~$1000 (if that's the price/btc), to get $40-$55 of profit, most of which will be taken away by fees anyway. Though I'm making little money after fees (which should add up to a decent chunk over time), I'll be moving tens of thousands of dollars back and forth. I intend on starting with a $20,000 investment. If I transfer $20k a month (or let's say I go gung ho and pull off $20k/week (wire transfers happen within a day, and exchanges support immediate market orders, so it's possible)), over time they'll add up to millions of dollars moved within a year. Though it's just the same $20k going back and forth over and over again, I'm sure Banks/Governments will very much take note.
- Let's start with the IRS. Do I need to register as a business? And as far as moving money in excess of $10,000 per transaction, I have to file Form 8300. Do I have to file the form every time I transfer more than $10,000 (which would be every single week)? Is this both for sending and receiving, or only for receiving?
- Does this put me at an increased risk of IRS audit? Though I'm not worried about that, everything I'll be doing is legit, documented, and reported. It'll just be a hassle, and I need to be aware that it's more likely to happen.
- Let's move on to homeland security, DEA, or God knows what else. Will they take note? A lot of money will be moving into the US through international wires from their perspective (but only wired back domestically to an American bitcoin exchange). Do I have to register with them? Do I have to do something else? Are there money laundering laws or something that will take affect?
- Is there something else obvious that I'm missing? For example: by doing this, I'll just drive the price of bitcoin down on the foreign exchanges and the law of diminishing returns will take effect?
Thanks for your input!
P.S. I'd rather not name the country I'm in, because I don't want everyone else to jump on this either. But this country has already been mentioned in other posts in relation to arbitrage due to the notable and consistent price difference in bitcoins.
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