> If you want to verify a user by sending a code through SMS[..]you either have to use the proprietary API, or you'll be banned from the play store.

Is this only in cases where the app reads the SMS as soon as it's received, and authorizes the user without any further user input?

Because I've done similar authentication stuff for some website logins (like a real estate listings one) where they require me to punch in the code I received via SMS. This was an interaction that occurred independently of Play Services I would imagine.