After clashing with regulators and being blacklisted by many banks and credit unions, many emerging-payments companies are seeking a warmer welcome outside the U.S.
Many of the affected companies provide services for users of the digital currency Bitcoin, which will likely require them to obtain money-transmitter licenses in Washington D.C. and the 47 states that require it. The cost of obtaining these licenses, excluding bonding requirements, is approximately $7 million to $10 million, says Guillaume Babin-Tremblay, executive director of Bitcoin Embassy in Montreal, Canada.
This cost, along with an evolving regulatory landscape, has sparked a “mass exodus of these companies to countries with friendlier legislation regarding Bitcoin in general,” he says.
Bitcoin Embassy promotes Bitcoin to local consumers and merchants and provides mentoring and fundraising for Bitcoin-related startups.
“We have a few companies based in the U.S. and we’re actually looking to reestablish these companies outside of the U.S., because of the unclear regulatory environment,” says Babin-Tremblay.
Coinapult, a company that allows customers to direct bitcoin transfers to email addresses or mobile phone numbers, took its operations to Panama to focus on non-U.S. customers without dealing with the constraints of U.S. regulation.
Bitcoin miners, or the users that maintain the digital currency’s official record of transactions, are categorized as money services businesses by Fincen, which issued guidance on virtual currencies this year. One of the companies Bitcoin Embassy is looking to reestablish outside the U.S. is a mining company.
Other governments seem to be taking a hands-off approach to virtual currency, but this environment may be short-lived. Many foreign governments have been asking U.S. regulators for advice, and may develop regulations that mirror what the U.S. has, according to Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network, who spoke at a recent Senate committee hearing in Washington, D.C.
Canada has yet to clarify its position on how Bitcoin businesses will be categorized. Bitcoin Ventures Inc. launched the CoinTap card, which allows consumers to obtain bitcoins by purchasing a stored-value card in retail stores, in Canada. And RoboCoin deployed its first cash-in/cash-out Bitcoin ATM in Vancouver, British Columbia, at the end of October.
Several Bitcoin companies have tried to register as MSBs with the Financial Transactions and Reports Analysis Centre of Canada (the equivalent of Fincen), says Babin-Tremblay. Their applications were rejected because, according to the agency, the businesses were not MSBs under current law, he says.