How Do Capital Controls in a Country Affect the Ability of Traders to Perform Cryptocurrency Arbitrage?

Capital controls are government restrictions on the flow of funds into or out of a country. They directly impede cryptocurrency arbitrage by making it difficult, slow, or expensive to move fiat currency to the location where crypto is cheapest or to repatriate profits from a sale.

For example, if Bitcoin is cheaper on a U.S. exchange, capital controls might limit a trader in another country from wiring the necessary funds to buy it. This friction prevents arbitrageurs from equalizing prices across borders, allowing significant price discrepancies to persist.