Coins.ph offers remittances to Philippines using Coinbase. Illegally?

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):

So, why is all this important? Well for starters, lets go back to the October 27th announcements from FinCEN (Financial Crimes Enforcement Network):

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:

 

 

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9 thoughts on “Coins.ph offers remittances to Philippines using Coinbase. Illegally?”

  • I think your understanding of how the system works is incorrect. Coins.ph is not purchasing bitcoin at coinbase. The customer is. The customer is then sending the coins to coins.ph in the philipines. The app simply makes the purchase/send automated. Its the customer who is doing the transmission.

    • David: I didn’t cite that Coins.ph is purchasing the Bitcoins, I’m cognizant that your client is. What you have is an app that is designed to do money transfers, because your customer (from the US) is willingly coming to your app for the purpose of money transfer (else they would not come here), you are in fact soliciting money transfers.

      Because you solicit money transfers via the app, which is a customer initiated effort, you are in fact a money transfer operator soliciting clients from the US, without money transmitter coverage. It does not matter if you call yourself a PH based wallet provider, etc.

      If you think I am wrong, let me know I’ll be happy to connect you on a call with FinCEN or any other regulator who would be happy to explain, that you would be classified as a money transfer operator, operating without a license.

      • If that’s true, couldn’t they simply not connect to coinbase directly with the app, and have an open settings page or allow add on plugins. Then another volunteer could create a plugin or instructions on how to connect to coinbase manually?

  • You seem to misunderstand how Bitcoin works. There is no such traditional remittance in Bitcoin world. User A can buy bitcoin at any legal exchange in US or even a person. He sends the fund to user B who may live in Philippine or Vietnam. User B may redeem the whole or part of bitcoin he holds at coin.ph or an exchange in Thailand or with a person who lives in Vietnam. bitcoin is fungible. You don’t even know which bitcoin is sold at coin.ph

    • Feel free to disagree. I stand by what I have cited. However, I don’t think you understand how the licensing and the regulatory framework in the US works. Rather than taking a whiplash approach, you are welcome to debate the same or talk with me on the same. My email is fk at faisalkhan.com or skype: babushka99

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