tl;dr: Coins.ph just broke the law in all 50 States by willfully conducting money transfer services without a money transmitter license and are not even registered with FinCEN (at the time of writing this article).
There is a very interesting article that caught my eye today in CoinDesk. A startup based out of Philippines is now offering remitters the ability to pay for their remittances using Bitcoin. The article can be read here: Philippines Startup Lets Coinbase Users Remit Cash.
The article almost makes it sound like Coinbase has gone into the business of remittances. It has not. I checked with some contacts at Coinbase. So what exactly is Coins.ph doing wrong in my opinion?
Have a look at their introductory video first:
Now, as much as I like the idea, I see some problems with this. Having confirmed 100% with Coinbase, that no formal arrangement exists as a contract between Coins.ph and Coinbase for remittances, which brings me to my other points:
- Q. Does Coins.ph enjoy an authorized delegate status of Coinbase? Answer: They do not, as coins.ph does not have any such statements on their website (which they would need to, if they were an authorized delegate of Coinbase).
- Q. Does Coinbase have a correspondent payout agreement with Coins.ph? Answer: No. I’ve confirmed this from my source inside Coinbase. Coins.ph simple is implementing a Coinbase wallet button on their app.
The website of Coins.ph does not display any indication of a formal association of being an Agent (Authorized Delegate) or as a correspondent payout for Coinbase.
Even the Terms of Service policy on their website has not been updated since Jan/2014, so I highly doubt a formal tie-up arrangement between Coinbase & Coins.ph exists (snapshot below):
- Subject: Request for Administrative Ruling on the Application of FinCEN’s Regulations to a Virtual Currency Trading Platform (PDF)
- Subject: Request for Administrative Ruling on the Application of FinCEN’s Regulations to a Virtual Currency Payment System (PDF)
So any which way you look at it, if you’re a bitcoin processor or broker, or an exchange, you are essentially a Money Services Business and for which one would require a Money Transmitter License.
If Coins.ph is willingly allowing US customers to signup on its app, transfer money to Philippines and pay using the Coinbase button, this means, Coins.ph is a Foreign Located Money Services Business. For this they would need a money transmitter license coverage (either by Coinbase, 3rd party or themselves). Since neither of the three cases are applicable to Coins.ph, they are in fact serious violation of the law.
FinCEN has made it clear via its 2012 ruling that Foreign-Located Money Services Businesses who essentially are conducting business inside the United States, even if they are not present here, are classified as MSBs and need to have MTL (Money Transmitter License) coverage in each state.
Even checking the FinCEN database, they are no where to be seen: