A problem that people have pointed out in the past about cryptocurrency exchange arbitrage is counterparty risk: different prices on different exchanges may be

A problem that people have pointed out in the past about cryptocurrency exchange arbitrage is counterparty risk: different prices on different exchanges may be taking into account the possibility that the exchange won't allow withdrawals, will delay the withdrawals, or doesn't have enough assets to satisfy all of its obligations. A large number of cryptocurrency exchanges have defaulted and/or restricted withdrawals in the past. So, an arbitrage strategy might appear very effective yet result in holding cryptocurrency or fiat currency on an exchange that won't allow it to be withdrawn or redeemed as expected. This could happen because of fraud by the exchange, fraud against the exchange, hacking of the exchange, or regulatory risks where other financial intermediaries stop working with an exchange or regulators threaten to punish an exchange if it processes certain transactions. Some people have suggested that because arbitrage opportunities are pursued aggressively, most price differences between cryptocurrencies and cryptocurrency exchanges that persist are probably mainly due to people taking account of counterparty risk. In that case you could still profit some of the time by betting that a risky exchange will remain solvent, but you might be taking a larger risk than you realize. Another interpretation is that some apparent cryptocurrency arbitrage opportunities are really opportunities to earn a premium for helping people evade capital controls and other regulatory restrictions on moving money around. For example, there are lots of people in China who would be happy to pay you a premium if you'd accept a payment in China and make a corresponding payment in Canada. In that case you might feel like you're being a clever arbitrageur but you're largely receiving a payment for helping someone circumvent regulations¹. (The implicit moral opprobrium that might be read there isn't intended, but I think it's interesting to consider how cryptocurrencies can sometimes make people feel very clever when they aren't, in fact, the cleverest ones in the situation!) (¹ which isn't necessarily unreasonable to describe as arbitrage)