CurrencyFair Suspends Foreign Exchange Service for US Customers

Currency Exchange

CurrencyFair came up on top for sending money to another country when I looked at different options a few months ago. See previous post Get the Best Exchange Rate: Bank Wire, Xoom, XE Trade, Western Union, USForex, CurrencyFair.

I used it once after I wrote that article. It worked very well. I registered an account online one evening. The account was activated the next morning after I uploaded a scan of my driver’s license and two utility bills for ID verification.

I wired money into CurrencyFair’s account at Bank of America in New York using a free wire transfer from Fidelity. Then I exchanged the US dollars into foreign currency online at CurrencyFair. I gave CurrencyFair the bank account where the foreign currency should go into in the destination country. CurrencyFair sent the currency into that account. The money arrived the next day.

The whole process took two days. If I do it faster I think I can squeeze it down to just one day. The exchange rate markup plus a small fee was approximately 0.5% of the transferred amount.

Soon after I completed the transfer, I received an email from CurrencyFair saying they were going to suspend their service to US customers. As of December 7, US customers couldn’t deposit any more money to CurrencyFair. Money already deposited must come out by December 31.

CurrencyFair stated the reason for the suspension was new regulatory compliance requirements. From the email:

Following our initial assessment of regulatory changes in the United States, including changes arising from the Dodd-Frank Act, CurrencyFair will temporarily withdraw services for US residents while we consider these requirements and how they impact our business model.

This was a difficult and very regretful decision but we are confident we will be able to resume services in the future. The exact date of re-activation has not yet been determined and may take some time. We appreciate your patience and will continue communicating our status and expected return.

I hope they will resume service in the US market soon. Otherwise US customers will have to go down the list and use a different service. In my case the next best alternative is more than twice as expensive as CurrencyFair.

On the other hand, CurrencyFair is a very small company. According to a recent press release, it received less than $5 million in funding since 2010, including the most recent round of $2.5 million in the end of October 2013. When you get $2.5 million in funding, what’s the best use of it? Is it on product development, marketing, or compliance? It may very well decide to stay in its core market in Europe and not take on the cost of regulatory compliance in the US.

If CurrencyFair sees it’s too costly to serve the US market due to compliance requirements, US consumers indirectly bear the cost by paying more to another provider that charges a higher margin. More regulations actually help the larger, more established, and more expensive companies.

[Photo credit: Flickr user Images_of_Money]

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  1. indexfundfan says

    I have switched to using Interactive Brokers for my forex needs. The best part is, the spread is only 1 PIP (1 basis point), about 1/50th of the spread at CurrencyFair. However, there are caveats which make it not practical for everyone to use.

  2. Daddy Warbucks says

    Harry – I was sad to see CF discontinue service for US customers too – it really worked well, even for modest amounts.

    Buck Payne – For larger amounts, USForex is my current provider – I can deposit money in US$ using ACH (free), then have them pay a UK payee directly in GBP, also free. This is how I am paying for my son’s college bills in the UK. The rates are way better than I can get through Barclays, and the whole process is very simple. I don’t know if they are licensed in every US state, I found other similar services that could not transact in MA.

    your mileage may vary, because the rate you get depends a lot on the size of the transaction, and transactions under $3K do incur fees (I wish I had that problem :-).

    PS love your site – bookmarking it now!

  3. B Chin says

    The situation around December 2013 wasn’t restricted to CurrencyFair accounts, it was far worse than that.

    On August 31, 2013 I moved from the Canada to the USA and needed a Canadian bank to hold my Canadian pension in the Canada equivalent of an IRA. None of the Canadian banks wanted to deal with me, because at the time the US FATCA was being rewritten and because the IRS imposes onerous reporting requirements on foreign banks holding US accounts.

    I ended up having to move back to Canada for 3 months just to get a Canadian bank to accept my account. As soon as I moved out again I got a phone call from the bank demanding to know if I was still an Canadian resident. They informed me that my account would be frozen in cash without interest until I came to the bank and showed more ID.

    Nine months later the situation was better, but I still had to fly all the way back to Canada to deal with the issue in person. I would like to thank the IRS and the US congress for yet again going the extra mile to make life hell for US citizens who get into any sort of international situation.

  4. B Chin says

    The situation around December 2013 wasn’t restricted to CurrencyFair accounts, In particular, I was caught in financial limbo with my Canadian pension because no Canadian bank wanted to deal with US citizens nonresident to Canada. It took a 3-month trip back to Canada to reacquire residency and get my money into a Canadian bank.

    I would like to thank the IRS and the US Congress for going the extra mile yet again to make life life hell for US citizens who get into any sort of international situation.

  5. MatthewF says

    Since I was unable to use CurrencyFair as I reside in the US, I looked into Transferwise. Their rates were better than USForex, Xoom, and XE. They also have a referral program that allows you to get your first transaction of up to $4500 for free. So took advantage of that and sent $4500 to Norway for an upcoming birdwatching trip. It took 4 days for the money to get there, but I got the rate that was quoted on the day I set the transfer up, even though the kroner had appreciated by 2% in the meantime. It was a direct bank-to-bank transfer, so it didn’t incur any other fees. It was easy to set up an account and easy to initiate the transfer.

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